Women directors contribution to organizational innovation: A behavioral approach

Mariateresa Torchia, Andrea Calabrò, Patricia Gabaldon, Sadi Bogac Kanadli

Article in press in Scandinavian Journal of Management

The number of women on corporate boards continues to slightly increase worldwide. Norway has the highest percentage of board seats filled by women (40,1%). However worldwide, this is an exception due to a 40% gender quota restriction that came into force in 2008. In fact, the percentage of board seats occupied by women in Canadian, US, the majority of European, and the
Asia-Pacific Stock Index Companies are lower than 30%. Thus, especially in Europe, increasing the number of women on boards is a target specified in policy makers’ agendas (e.g., quota laws in Italy, Spain, Iceland, France, and Germany, and EU 2020 Targets).

Having in mind this landscape, many studies have investigated the effect that women directors might have on firm performance, often presenting contrasting results about the positive, negative or non-impact of women directors on firm performance.
In order to make clarity on the impact that women directors might have on firm performance, the article published in the Scandinavian Journal of Management, by Prof. Mariateresa Torchia and colleagues, aims at understanding the contribution of women directors to the level of organizational innovation. Specifically drawing from behavioral theory of the firm and using data
from 341 Norwegian companies, they found out that having more women directors is beneficial for the companies as they are able to impact positively the level of organizational innovation.

This positive effect on organizational innovation comes from two sources:

  • the greater presence of women on boards introduces different perspectives
  • views to the decision-making process (cognitive conflict) and increases the level of preparation and involvement of all directors in the board meetings. In both cases, more gender diversity on boards results in a very positive outcome.

From this perspective, as long as women directors have the chance to actively participate in board discussions and present their perspectives, boards may benefit from their women directors’ talent in making strategic decisions.

This study offers interesting managerial insights indicating the importance of women directors ‘contribution to strategic decisions (organizational innovation) given that an open board atmosphere or supporting activities are provided.

If gender diversity on boards leads to organizational innovation through women’s contribution to cognitive conflict and greater preparation and involvement, the contribution of diversity to organizational innovation can easily be reinforced on boards. In particular, supporting activities should consider efficient ways of sharing board meeting agendas and of course providing necessary documents and information prior to board gatherings. Information about the firm is possessed and controlled by the CEOs,
who might not be willing to share this information with particularly new directors, to preserve his or her power on the board.

It might be important for firms to have third parties, for instance, a board committee, to facilitate the flow of all required information to directors before board meetings. Likewise, to facilitate open and free task-related debates, corporate leaders might
consider separating the chairperson a?d CEO positions, as powerful CEOs may be willing to demonstrate his or her power by opposing the directors’ perspectives, ideas, and opinions.

By Mariateresa Torchia