Female Directors and Technological Innovation: Evidence from China

Abstract

Research on strategic leadership's role in achieving superior performance in technological innovation is still evolving, particularly regarding the effects of female directors and the contextual factors that enhance their effectiveness. This study provides a comprehensive view of female directors’ influence on R&D initiatives, innovation outputs, and innovation efficiency. Using Upper Echelons Theory and Agency Theory as the theoretical framework, the study employs fixed-effect regression for baseline outcomes, addressing endogeneity with prediction modeling, propensity score matching, and an instrumental variable approach on panel data from Chinese listed firms (2008–2021). Findings indicate that female directors not only enhance R&D investment but their presence on the board achieves higher innovation outcomes and ensures innovation efficiency. Findings also reveal that the interaction with CEOs is crucial, as newly appointed CEOs moderate the advisory role of female directors, while CEO power influences their monitoring role. The study also shows that female directors are more effective when they constitute a critical mass on the board rather than merely having token representation. These findings suggest that including women on the board is essential for superior innovation outcomes, especially when resource efficiency is a firm's priority.

Keywords

technological innovation female directors upper-echelons theory agency theory

Introduction

Technological innovation is crucial for organizational success in today's competitive landscape, ensuring survival, competitive advantage, and adaptability to market changes (Ortiz-Villajos & Sotoca, 2018). The strategic initiatives of corporate leadership play a crucial role in allocating and managing resources for innovation (Ben Rejeb et al., 2019). The technology leadership of companies such as Apple, IBM, Tesla, and Alibaba Group, led by strategic leaders, provides real-world examples. Therefore, research inquiries into the human factor of technological innovation predominantly emphasize corporate leadership dynamics, while the literature on this topic is still developing.

Directors play a key role in identifying opportunities and allocating resources (Robeson & O’Connor, 2013). Their fiduciary duties, particularly monitoring and advising, are crucial in the formulation, implementation, and evaluation of organizational strategies (Arora, 2018). Therefore, a strand of literature focuses on how the directors with their unique knowledge, backgrounds, capabilities, resource accessibility, political affiliations, and prior experiences, influence innovation (Alderman et al., 2022; Li et al., 2019). Understanding these dynamics is vital for designing effective leadership structures, such as board composition, to best navigate innovation.

Female directors, with their unique attributes, backgrounds, experiences, and values, attract particular scholarly attention, especially when it comes to navigating innovation (Chen et al., 2021; Chu & Oldford, 2022). Understanding their role is crucial because their presence signals fair inclusion and quality governance (Ain et al., 2020). In particular, the challenges female directors face in excelling in their roles make their contributions crucial (Zalata et al., 2019). Since pursuing innovation is a complex organizational goal, examining their role in fostering innovation offers significant insights for organizations. This highlights how their presence and active participation align with strategic goals such as innovation, where their role should transcend mere token representation.

The traditional view of innovation emphasizes the contextual factors that foster R&D initiatives (Díaz-García et al., 2013; Griffin et al., 2021). However, this perspective often overlooks critical aspects of innovation growth potential, such as R&D effectiveness in generating output and the efficient utilization of technological investments (Jia et al., 2019). Investors scrutinize patent portfolios to gauge R&D growth potential (Shahzad et al., 2022a). In particular, high innovation efficiency assures investors that investment in R&D initiatives is used effectively, promising substantial returns (Huang et al., 2019). For organizations, it ensures optimal utilization of R&D resources, leading to significant breakthroughs without unnecessary costs. A holistic view of innovation is achieved when organizations not only excel in fostering R&D initiatives but also in delivering superior innovation outcomes and ensuring efficiency (Shahzad et al., 2021c). However, research on leadership dynamics and innovation rarely provides this comprehensive view of technological innovation, leaving several critical questions unanswered.

Existing research on female directors and innovation remains underdeveloped in fully capturing their role (Chen et al., 2021; Díaz-García et al., 2013; Hernández-Lara & Gonzales-Bustos, 2020). For instance, studies do not fully portray female directors’ involvement in enhancing a company's patent generation or how they streamline the innovation process to maximize productivity and growth potential. In addition, research on innovation is incomplete without acknowledging directors’ fiduciary roles, which involve managing agency risk (Shahzad et al., 2021b). Agency theory highlights these roles as key to mitigating principal-agent conflicts, and studies show that female directors excel in these areas due to their diverse characteristics and commitment, particularly in managerial opportunism (Zalata et al., 2019), cash holding (Cambrea et al., 2020), and earnings quality (Tee & Kasipillai, 2022). The monitoring and advising on innovation differ from other business aspects, requiring a deep understanding of evolving technologies and the ability to navigate uncertainty (Shaikh & Colarelli O’Connor, 2020). In the context of technological innovation, female directors may face unique challenges, such as gender bias and resistance to change, impacting their influence on innovation processes (Zalata et al., 2019). Understanding the conditions under which they can better excel in their roles is crucial. Current literature often overlooks these contextual factors, leading to recommendations that fail to address challenges in fostering innovation through inclusion and diversity.

We aim to address the above-mentioned shortcomings. Compared to the prior studies, this research is in a better position to demonstrate that the presence of female directors on the board is not only crucial for initiating innovation but also instrumental in achieving superior performance and efficiency. In addition, the study also informs on the moderating factors that enable female directors to excel in their fiduciary roles, such as monitoring and advising, on technological innovation. Our research inquiry aligns with broader research problems related to understanding the human factors in technological innovation, particularly illustrating how the leadership dynamics associated with female directors influence technological innovation. The study's fresh insights can serve as effective guidelines for strategic organizational design, specifically concerning the composition of women on the board.

Our theoretical framework combines UET and agency theory to examine how female directors influence technological innovation through their diverse characteristics and fiduciary roles in advising and monitoring. We assess components of innovation, including R&D costs, patent counts, and innovation efficiency, while considering the moderating effects of newly appointed CEOs and CEO power. Our motivation is rooted in the existing literature on CEO dynamics, specifically newly appointed CEOs, driven by legacy building and performance pressure, to enhance the advisory roles of female directors. However, CEO power moderates female directors monitoring roles through greater resource allocation and alignment with diversity initiatives. The theoretical model is tested using panel data from Chinese listed firms spanning the years 2008 to 2021. China's significant economic growth, investment in technological innovation, diverse corporate landscape, and evolving gender roles in top echelons provide a relevant and rich context for this analysis.

The study is structured as follows: Section two discusses the theoretical framework and hypotheses, Section three details the materials and methods, Section four presents and discusses the results and Section five concludes with a summary of findings and their implications.

Theory and Hypotheses

Innovation Metrics and Importance

Recent research on innovation emphasizes a holistic view of the innovation process, encompassing innovation input, output, and efficiency (Jia et al., 2019; Shahzad et al., 2021c). The resources dedicated to pursuing innovative activities are reflected in innovation input, often represented by R&D expenditures. Organizations actively engaged in R&D are better positioned to adapt to market trends and gain a competitive advantage (Choi & Lee, 2018; Shahzad et al., 2021a). Patent counts provide a quantitative measure of an organization's R&D investment and are frequently used to assess the tangible outcomes of innovative activities. Academic research leverages patent counts to gain insights into organizations’ research and development efforts and to track technological progress over time (Blazsek & Escribano, 2016). The quantity of patents issued represents the number of technical developments, with higher counts often indicating increased innovation. Research inquiries into patent counts are essential for understanding technological progress (Liu et al., 2022). They represent the effective development of unique ideas and intellectual property protection (Liegsalz & Wagner, 2013). A larger number of patents is frequently associated with improved technological significance and the possibility for market leadership (Huang et al., 2021). Finally, innovation efficiency, measured by scaling patent counts with R&D expenses, presents a nuanced viewpoint. It goes beyond quantitative output to examine how efficiently firms transform their R&D spending into practical inventions (Hong et al., 2015). This metric is particularly instructive since it emphasizes the significance of resource optimization in ensuring that firms get the most out of their innovation efforts. It aids CEOs in making informed strategic decisions and strengthens competitive advantage by enabling quicker and more cost-effective product development. High innovation efficiency boosts stakeholder confidence in the organization's ability to innovate and lead in its industry (Shahzad et al., 2022b; Zhang & Huang, 2022). Therefore, a holistic view that comprehensively examines R&D costs, patent outputs, and innovation efficiency provides a more nuanced understanding of the intricate dynamics of technological progress.

Innovative Success: Directors advising and monitoring essentials

Based on agency theory, the role of directors is instrumental in promoting technological innovation, particularly through their fiduciary duties of monitoring and advising (Robeson & O’Connor, 2013). Advisory committees provide strategic direction, prioritizing R&D initiatives and managing resources efficiently (Acevedo et al., 2023). Advisory committees typically comprise directors who are industry experts, technology specialists, market strategists, and former executives, whether they are inside or independent directors. Their fiduciary role involves advising on various aspects of the organization's operations (Habib & Hasan, 2017; Xiumei et al., 2023). In the innovation process, advisory directors ensure effective resource allocation for high-impact R&D initiatives (Keding & Meissner, 2021). They guide the organization in ensuring that R&D efforts lead to tangible, competitive advantages (Arora, 2018). Their industry expertise in streamlining research processes plays a crucial role in maximizing patent outputs and minimizing R&D expenditures, achieving high innovation efficiency. Advisory directors are particularly crucial for newly appointed CEOs in identifying high-potential innovation opportunities (Shahzad et al., 2021b). As new CEOs seek significant early achievements, they reinforce advisory directors’ expertise for informed strategic decisions (Suzuki et al., 2021). They actively foster a collaborative culture and integrate diverse perspectives into the advising process.

Monitoring committees ensure compliance, evaluate progress, and maintain accountability (Guldiken & Darendeli, 2016). Directors on monitoring committees, usually independent directors, typically include legal and compliance experts, financial specialists, audit committees, and analysts. A competent board oversight is critical for controlling multiple elements of innovation. In innovation input, monitoring is crucial to reviewing budgets and resource planning, enhancing the firm's potential to invest more in R&D activities (Guldiken & Darendeli, 2016). In the context of innovation output, monitoring is critical to ensure the effective creation and deployment of new goods, processes, or services. As a result, boards of directors are in charge of assessing the achievements of innovation endeavors (Desender et al., 2016). A robust monitoring system ensures that the organization's innovation activities remain synchronized with market demands, promoting long-term growth and competitiveness (Faleye et al., 2011). Board monitoring is critical in the context of innovation efficiency for evaluating the efficacy of innovation processes, finding bottlenecks, and adopting strategies for continual improvement (Sandvik, 2020). An effective board monitoring system improves the organization's responsiveness to market changes and technical improvements. In this context, powerful CEOs reinforce the monitoring board committee's role in fostering technological innovation to ensure that compliance and progress evaluations align with the strategic goals (Chen, 2014). When CEOs are resourceful, they effectively leverage the committee's oversight to support innovative initiatives, manage risks, and allocate resources efficiently.

Theoretical Perspective

The study's theoretical framework is based on two main theories: upper echelons theory (UET) and agency theory. To fully understand how these theories are integrated and complement each other, it is crucial to break down their critical components and relevance to our hypothesis development.

UET links three critical components: the characteristics of top executives, their strategic choices, and the impact on organizational outcomes (Hambrick & Mason, 1984). CEOs, directors, and senior management constitute the upper echelons, whose backgrounds include demographics (education and background), psychological factors (personality traits, cognitive biases, values), and professional experiences (industry experience, prior roles). Executives interpret information and make decisions based on their experiences and values, influencing their judgment and strategic choices, thereby affecting organizational outcomes. UET is widely used in organizational science to analyze how executive demographics affect decision-making, innovation, board diversity, leadership styles, team dynamics, and firm performance.

The inclusion of women in top echelons is a critical research area. Women bring diverse experiences and perspectives due to their unique social roles, empathetic approach, collaborative mindset, and varied life and workplace experiences. In particular, their presence on boards leverages greater diversity in values, experiences, and decision-making skills, fostering openness to adopting new technologies. Prior research using UET has linked female directors to reducing agency costs, fostering innovation, improving corporate social responsibility, and enhancing investment efficiency and organizational performance.

However, UET has not fully explored where female directors excel or their comprehensive impact on the entire innovation process, from R&D initiatives to efficiency improvements. In particular, UET lacks insight into the collaborative dynamics between female directors and CEOs, especially in navigating technological innovation. It is crucial to understand the effective interaction between two key players who collaborate constructively to reinforce each other's roles, leading to superior outcomes and improved efficiency in the innovation process. Understanding these dynamics is crucial for advancing UET and recognizing female directors as key players in the top echelons who leverage technological innovation across several domains.

However, the UET lacks a detailed focus on the fiduciary responsibilities that female directors undertake to mitigate agency risk arising from principal-agent conflicts. Agency theory complements UET by addressing this gap, highlighting mechanisms to reduce agency costs in the context of technological innovation. Agency theory suggests that directors’ advisory and monitoring roles provide a structured approach for identifying, assessing, and mitigating potential agency risks associated with innovation. The board of directors primarily performs two key roles: advising and monitoring. These are distinct but complementary functions (Le et al., 2022). The director's monitoring committee critically tracks progress and ensures compliance with established procedures or goals. The board monitoring committee, made up of independent directors, focuses on oversight and supervision. Independent directors are better equipped to monitor management effectively due to their limited connections with them, which strengthens their capacity to oversee operations and protect their reputations in the independent directorship market (Sandvik, 2020). In contrast, the advisory committee requires directors to offer suggestions, strategies, or recommendations to help management enhance their work and achieve better results (Bankewitz, 2018). The advising function aims to develop, improve, and provide insightful guidance for innovation strategies and processes. Both mechanisms are significantly reinforced through agency theory, which mitigates principal-agent conflicts and fosters innovation.

UET offers insights into how female directors’ backgrounds shape decision-making and strategic advice, while agency theory highlights their roles in managing agency risk through robust advisory and monitoring functions. Integrating UET and agency theory can elucidate the multifaceted impact of female directors on fostering an innovative organizational culture.

Hypothesis Development

Female Directors and Technological Innovation

Consistent with the UET, a firm's ability to cope with innovation primarily stems from unique attributes of management (Drees & Heugens, 2013). The presence of females in the boardroom signals quality governance and inclusivity that capitalizes on new resource channels (Adams & Ferreira, 2009; Atif et al., 2020). This allows firms to access new markets and establish strategic alliances not previously considered for resource acquisition. UET focuses on the functions that mostly require directors’ active involvement in overseeing and advising on resource acquisition and utilization (Bankewitz, 2018; Faleye et al., 2011). Monitoring helps identify and address resource gaps, ensuring the organization maintains its resource base (Desender et al., 2016). Inclusivity enhances this process by demanding effective oversight, especially with women on the board (Zalata et al., 2019). Advising aids organizations in navigating external environments and aligning resource strategies with new opportunities (Minichilli & Hansen, 2007). Female directors offer distinct networks and perspectives, providing agents with new sources of information for acquiring resources that male-skewed boards may overlook (Zalata et al., 2019). Therefore, boards with female directors appear to bring significantly more resources that enable organizations to navigate strategic initiatives more effectively, resulting in superior outcomes in terms of radical growth. It is reasonable to argue that the effect size of boards with female directors may be substantially greater in driving technological innovation. In addition, female directors often come from diverse backgrounds compared to their male counterparts and embracing their diverse features creates an environment that supports R&D initiatives (Griffin et al., 2021). For instance, their diverse leadership styles embrace risk tolerance and foster effective cross-functional teamwork, both essential for driving increased innovation outputs (Ingersoll et al., 2023). Female directors often adopt a more balanced approach to risky initiatives (Adhikari et al., 2019). While this may seem counterintuitive, it can result in more thoughtful decision-making in leveraging innovation efficiency (Huang et al., 2019; Shahzad et al., 2021b). Their meticulous nature is beneficial for monitoring technological projects, ensuring that agents carefully consider every aspect of innovation and leading to improved oversight of R&D processes and outcomes (Zalata et al., 2019). In addition, female directors’ articulate and expansive features enable them to convey strategic visions and provide guidance on R&D investment and superior performance (Burgess & Tharenou, 2002).

The study evaluates technological innovation by analyzing three fundamental metrics: input (represented by R&D cost), output (measured through patent counts), and innovation efficiency (captured by the ratio of patent counts to R&D cost). R&D cost, a crucial metric, reflects better resource management, financial commitment, and investment directed toward innovative activities (Alessandri & Pattit, 2014). The presence of female directors ensures effective resource management and offers leadership attributes crucial for careful monitoring and advising on long-term investments and R&D initiatives. Patent counts are a measurable indicator of innovation output (Liegsalz & Wagner, 2013). The expectation is rooted in the notion that including female directors on the board allows for better overseeing and counseling of how R&D resources are utilized to generate more output. Finally, the study explores the evaluation of innovation efficiency, which assesses the effectiveness of the innovation process in translating inputs into tangible outcomes (Gao & Chou, 2015). The anticipation is that the collaborative and diverse organizational environment fostered by the inclusion of female directors enhances the efficiency of innovation-related activities. Therefore, the following hypothesis is framed.

Hypothesis 1: The presence of female directors on the board significantly fosters technological innovation, resulting in high R&D, patents, and innovative efficiency.

Female Directors’ Advisory Role

The advisory is one of the primary roles of the directors involves offering expert recommendations and guiding the development and implementation of strategic initiatives, including technological innovation (Bankewitz, 2018). Agency theory suggests that effective advisory is instrumental in curbing the agency cost associated with technological innovation (Acevedo et al., 2023). In this context, the study suggests that the presence of female directors on advisory committees is a mechanism through which they can promote technological innovation. Female directors excel in advisory roles due to their distinct interpersonal traits (Kim & Starks, 2016). They are more likely to exhibit communal qualities such as caring, nurturing, sympathy, and friendliness, as opposed to focusing on power and assertiveness (Zalata et al., 2019). Their inclusion facilitates strong connections with customers, employees, investors, and other stakeholders, positioning them as well-suited to provide more targeted guidance on strategic development and implementation (Atif et al., 2020). Regarding the personality traits of female directors, their moral reasoning is frequently guided by a focus on building trust, sustaining relationships, and fulfilling expectations (Lai et al., 2023). This tendency often leads to a greater inclination to demonstrate ethical behavior in their advisory roles. These commendable communal traits and ethical values make them particularly effective in advisory positions (Bøhren & Staubo, 2016; Elnahass et al., 2024). However, several conditions reinforce the strategic importance of female advisors, particularly in the innovation process. For instance, newly-appointed CEOs often aim to make a significant impact and establish a legacy by adopting technological innovations (Suzuki et al., 2021). They rely more on the advisory board to ensure that informed decisions are made toward achieving radical growth and to mitigate potential agency risks (Sarros & Sarros, 2007; Shahzad et al., 2021b). As new CEOs are particularly attuned to meeting stakeholder expectations, they often find increased opportunities for effective interaction with female directors. Such interactions enhance the CEO's credibility regarding inclusion, diversity in top leadership, and ensuring quality governance (Waldman et al., 2004). In addition, newly-appointed CEOs’ interaction with female directors reinforces the board's advisory qualities, such as empathy, effective stakeholder relations, and attention to detail, which are often associated with female directors. They favor not only reinforcing female directors in the advisory committee due to their nurturing and empathetic qualities but to ensuring that all board members’ contributions are respected and valued, fostering an inclusive environment. It also benefits newly appointed CEOs by enhancing their soft image in maintaining high-quality governance through the promotion of inclusivity and diversity in the boardroom (Ma et al., 2015). Newly appointed CEOs place greater importance on the presence of women on the advisory committee because it fosters more established connections with customers and stakeholders (Zalata et al., 2019; Zeni et al., 2016). This, in turn, assists CEOs in obtaining high-quality information to accelerate the development of new products and processes. Based on the above argument, the following hypothesis is framed.

Hypothesis 2: The presence of female directors on the advisory committee has a positive effect on technological innovation, and this relationship is positively moderated by newly-appointed CEOs, further strengthening the impact.

Female Directors’ Monitoring Role

Agency theory predicts that the effectiveness of monitoring depends on the composition of the board, with evidence suggesting that including female directors enhances the dynamics of oversight (Ain et al., 2020; Elnahass et al., 2024). Female directors tend to have qualities that make them more effective at monitoring (Elnahass et al., 2024). They are generally seen as more cautious and more attentive to executive activities related to the innovation process (Chu & Oldford, 2022; Zalata et al., 2019). Their active involvement in monitoring roles is linked to better preparation for board meetings, greater thoroughness, stricter oversight of R&D activities, and enhanced efficiency (Chen et al., 2021; Chu & Oldford, 2022). Female directors are often recognized for their lower rates of board meeting absenteeism. Their presence not only improves overall attendance but also enhances the board's effectiveness in overseeing the innovation process (Adams & Ferreira, 2009). In addition, their presence in the monitoring committee helps reduce groupthink, fostering more critical discussions during the monitoring process (Bøhren & Staubo, 2016). However, the effectiveness of the board's monitoring role also relies on the CEO's leadership style and influence, as the CEO plays a crucial role in guiding board decisions. Specifically, a powerful CEO is more proactive and resourceful in setting a strategic direction that encourages the board to critically oversee the innovation process (Sheikh, 2019). Therefore, understanding how powerful CEOs interact with monitoring committees and support the role of female directors is crucial. Such interactions can facilitate consensus-building during intense monitoring scenarios and help nurture an inclusive culture that minimizes conflicts and promotes a broader range of solutions for addressing innovation challenges. The CEO's stance on inclusion affects how much female directors are encouraged to excel in their fiduciary duties, such as monitoring. Ultimately, a powerful CEO is better positioned to create an environment where female directors can effectively perform their monitoring roles. In a real-world example, Elon Musk's leadership at Tesla demonstrates how his visionary style influences the role of female directors, such as Robyn Denholm, in promoting innovation. Denholm, as chair of the board, helps balance Musk's ambitious goals with effective governance, ensuring that innovation is pursued within a framework of oversight and accountability (He et al., 2023). Her presence enhances resource management and supports Tesla's strategic initiatives, fostering a robust environment for technological innovation. Based on the insights mentioned above, the following hypothesis has been framed.

Hypothesis 3: The presence of female directors on the monitoring committee positively influences technological innovation, and this relationship is moderated by CEO power, with greater CEO power further strengthening the positive effect.

Material and Methods

Data Source

The study draws on data from the China National Intellectual Property Administration (CNIPA), previously known as the State Intellectual Property Office (SIPO), the third-largest intellectual property office globally. Firm-level financial statement data is obtained from the China Securities Market and Accounting Research (CSMAR), a comprehensive repository of financial information for enterprises listed on the Shanghai and Shenzhen Stock Exchange. The initial sample consists of 23,444 firm-year observations, excluding financial, utility, and service sector firms due to their unique capital structures. The final sample includes 16,333 firm-year observations from 11 manufacturing industries spanning from 2008 to 2021.

Variables Measurement

Dependent Variable. Technological innovation is assessed through three dimensions: innovation input, output, and efficiency. Following established scholarly works, the logarithmic transformation of Research and Development (R&D) expenditures represents innovation input, denoted as InRD (Choi & Lee, 2018). Similarly, the logarithmic transformation of patent counts, labeled as InPat, signifies innovation output (Huang et al., 2021). Innovative efficiency, which measures a firm's ability to generate patents relative to its R&D budget, is the ratio of innovation output (patents) to R&D cost (Hong et al., 2016). This efficiency metric is symbolized as IEY in the analyses.

Explanatory Variables. The main explanatory variable in this study is the ratio of female directors on the board, denoted as FMR. This ratio is commonly used in the literature to represent female board representation (Griffin et al., 2021). In examining the roles of female directors in advising and monitoring, directors typically serve on multiple committees, categorized as either: (1) monitoring committees (e.g., audit, compensation, governance, and nominations) or (2) advising committees (e.g., strategic and financial planning). Previous research identifies a monitoring director as one who serves on at least two main monitoring committees, as directors are usually limited to serving on two such committees (Faleye et al., 2011; Zalata et al., 2019). Thus, this study classifies a non-executive female director as a monitoring director if she is part of at least two monitoring committees. The study measures the monitoring role of female directors by calculating the percentage of female directors involved in monitoring committees out of the total number of monitoring directors, denoted as female monitoring directors (FMD). For advisory roles, prior literature categorizes directors as advisory if they are not part of any monitoring committees but serve on at least one advisory committee. Therefore, we define female advisory directors (FAD) as the percentage of female directors in advisory roles relative to the total number of advisory directors. In the context of moderating factors, a dummy variable of the newly appointed CEO (CNA) is created, which equals one for newly appointed CEOs and zero otherwise (Shahzad et al., 2021b; Xie, 2015). Second, we estimate CEO power index (CP), which is constructed based on CEO duality (a binary variable indicating one if the CEO also serves as chairman), educational attainment (a binary variable indicating one if the CEO holds a master's degree or higher), board monitoring ratio (a binary variable indicating one if the proportion of independent directors on the board is below the industry median), and CEO incentives (a binary variable indicating one if the CEO's monetary incentives within the firm exceed the industry median) (Sheikh, 2019). CEO power index (CP) is the sum of four dummy variables: CEO duality, CEO education power, board monitoring power, and CEO incentive power, ranging from zero to four.

Control Variables. The study includes several firm-specific control variables to address omitted variable bias, mitigate spurious correlations, and enhance the generalizability of findings. Including control variables in regression analysis helps to isolate the effect of the primary independent variable by accounting for confounding factors. The study incorporates controls for factors: (1) Firm size (FS), represented by the natural logarithm of total assets. (2) Corporate growth (GT) is calculated as the ratio of the variance in sales between the current and previous year to the sales in the prior year. (3) Corporate profitability (ROA) is the ratio of operating profit to total assets. (4) Corporate liquidity (LQ), measured by the current to total assets ratio. (5) R&D personnel (In_RDP), represented by the natural logarithm of R&D team members. (6) Workforce efficiency (InK/L) is determined as the ratio of fixed assets to the R&D workforce. (7) Cash flow volatility (CFV), assessed through the free cash flow standard deviation over the past three years. (8) Government subsidy ratio (GSR), calculated as the subsidy for high-tech projects scaled by total assets. (9) Managerial incentives (EQI), gauged by the shareholding ratio of the CEO and directors. (10) Institutional investors (II), represented by the shareholding ratio of mutual funds, banks, insurance companies, qualified foreign investors, social security, and brokerage funds. In addition, the study controls for firm performance, stock return, and risk as potential confounding factors in the prediction modeling for the endogeneity test. Corporate performance is denoted by Tobin's Q ratio (TQR), calculated as the ratio of the market value of assets to the book value of assets. Stock return is represented by the annual weighted stock return (SR), while risk is measured by the standard deviation of daily stock return (rk).

Research Design

Eq. 1 represents the core regression model, maintaining a consistent structure with minor modifications, as commonly observed in prior studies on firm-level governance dynamics and technological innovation (Díaz-García et al., 2013; Griffin et al., 2021; Shahzad et al., 2021a, 2021b, 2021c).

Technological Innovatio n_{i, t} = \propto + β_{1} {FMR}_{i, t - 1} + \sum_{j = 11}^{n} β_{J} {CV}_{i, t - 1} + λ_{t} + ε_{i, t}

(1)

Technological innovation involves innovation input (InRD), output (InPat), and innovative efficiency (IEY). The term FMR represents female directors. All control variables used in the regression analyses are denoted as

\sum C V

. The terms i and t represent the firm and current year, respectively, while

λ_{t}

signifies the time effect. The error term is denoted as ε.

The study uses Ordinary Least Squares (OLS) fixed effects for the baseline estimates. However, fixed effect regression can suffer from omitted variable bias and reverse causality, leading to biased and inefficient estimates in the context of endogeneity. To address these, the study employs prediction modeling, instrumental variable Generalized Method of Moments (IV-GMM), and propensity score matching to ensure robust results. IV-GMM effectively controls for heterogeneity and endogeneity, using the Kleibergen-Paap RK LM test to prevent imperfect identification and the Wald-F test to identify weak correlations with endogenous regressors. The Sargan-Hansen test is also used to validate the instruments. Propensity score matching helps achieve unbiased outcomes by creating a control group of firms without female directors for comparison with the treatment group. This method allows for a thorough examination of biases from differences between the groups, focusing on factors predicting treatment rather than the treatment itself.

Results

Descriptive Analysis

Table 1 demonstrates the descriptive estimates, presenting the average, standard deviation, and range of values of all variables used in this study. The mean value of female ratio the on board is 0.345, ranging from 0 to 0.697.

Table 1.

Summary Statistics.

Variable	N	Mean	Std. Dev.	Min	Max
R&D cost (InRD)	16,333	10.10	3.80	0	27.49
Patents (InPat)	16,333	3.52	1.52	0	10.52
Innovative efficiency (IEY)	16,333	9.72	6.94	0	16.57
Female ratio on the board (FMR)	16,333	0.35	0.12	0	0.69
Female director ratio on the advisory committee (FAD)	16,333	0.17	0.09	0	0.47
Female director ratio on the monitoring committee (FMD)	16,333	0.19	0.12	0	0.44
Firm size (FS)	16,333	21.75	1.20	19.48	25.32
Growth (GT)	16,333	0.18	0.32	−0.03	2.11
Profitability (ROA)	16,333	0.14	0.07	−0.01	0.30
Liquidity (LQ)	16,333	2.46	0.71	0.30	2.85
R&D personnel (In_RDP)	16,333	1.62	2.57	0	10.58
Employees efficiency (InK/L)	16,333	7.53	0.72	−2.83	12.93
Cash flow volatility (CFV)	16,333	2.41	0.44	0.036	4.31
Govt. subsidy ratio (GSR)	16,333	0.05	0.07	0	0.04
Managerial equity incentives (EQI)	16,333	0.10	0.18	0	0.37
Institutional investors (II)	16,333	0.11	0.02	0.08	0.38
Newly appointed CEOs (CNA)	16,333	0.47	0.12	0	1
CEO power index (CP)	16,333	2.21	0.94	0	4
Tobin's Q ratio (TQR)	16,333	2.15	1.93	0	10.39
Stock return (SR)	16,333	0.23	0.11	−0.20	3.27
Risk (rk)	16,333	0.03	0.02	0.01	0.14

Table 2 presents the Pearson correlation test, examining multicollinearity among variables. The results show that inter-variable correlations for all control variables are too weak to cause multicollinearity. Diagnostics, including variance inflation factor (VIF) estimation, confirm this, with VIF scores consistently below five in panel data. While VIF is commonly used in social and behavioral sciences, its limitations are recognized. Including instrumental variables is considered more reliable for addressing multicollinearity and endogeneity issues (Kalnins & Praitis Hill, 2023). The findings are further strengthened by incorporating instrumental variables in subsequent analyses.

Table 2.

Correlation Index.

	InRD	InPat	IEY	FMR	FAD	FMD	FS	GT	ROA	LQ	In_RDP	InK/L	CFV	GSR	EQI	II	CNA	CP	FTB	FCM	TQR	SR	rk
InRD	1
InPat	0.98^a	1
IEY	0.58^a	0.67^a	1
FMR	0.42^b	0.48^a	0.38^a	1
FAD	0.32^a	0.36^a	0.21^a	0.67^a	1
FMD	0.26^a	0.33^a	0.28^a	0.61^a	0.50^a	1
FS	0.03^b	0.13^a	0.12^a	0.11^a	0.09^a	0.07^a	1
GT	0.15^a	0.25^a	0.19^a	0.02^c	0.03^c	0.12^c	0.09^a	1
ROA	0.11^a	0.10^a	0.09^b	0.07^a	0.11^a	0.11^a	0.11^a	0.15	1
LQ	0.24^a	0.27^a	0.13^a	0.09^a	0.21^a	0.09^a	0.13^a	−0.01^c	−0.13^a	1
In_RDP	−0.03^b	−0.02^c	0.01^c	0.13^a	0.09^a	0.01^a	0.19^a	0.05^b	−0.06^c	−0.01^c	1
InK/L	−0.06^a	−0.10^a	−0.11^a	0.01^a	0.04^a	0.11^a	−0.03^a	0.07	0.02^c	0.01	0.05^a	1
CFV	0.18^a	0.19^a	0.17^b	0.03^a	0.02^a	0.12^a	−0.01^a	0.03^a	−0.12^a	−0.19	0.17^a	0.11^a	1
GSR	0.30^a	0.28^a	0.18^a	0.06^a	0.03^a	0.08^a	−0.08^a	0.02^c	0.12^a	0.09^a	0.27^a	0.14	0.10^a	1
EQI	0.17^a	0.26^a	0.17^a	0.21^a	0.11^a	0.13^a	0.21^a	0.02^c	0.31^a	−0.17	0.02^c	−0.14^a	0.12	−0.08^a	1
II	0.11^b	0.12^b	0.11^a	0.10^a	0.13^a	0.12^a	0.03^a	0.16^b	0.18	−0.03^a	−0.10^a	0.13^b	−0.19	−0.04^a	−0.03^a	1
CNA	0.27^a	0.21^b	0.21^a	0.11^a	0.10^a	0.14^a	0.02^a	0.11^c	0.16^a	0.02^c	0.19^a	0.07	0.03^a	−0.31^a	−0.32^a	0.21^a	1
CP	0.11^a	0.17^c	0.13^b	0.17^a	0.07^a	0.10^a	0.13^a	0.11^a	0.14^a	0.09^a	0.28^a	0.09^a	0.17	−0.03^a	0.19^a	−0.03	0.08^a	1
FTB	0.11^a	0.10^a	0.11^b	0.39^c	0.09^c	0.20^c	0.02^a	0.21^a	0.21^a	0.08^a	−0.11	−0.03^a	0.32^c	0.14^a	0.12^a	−0.11^a	0.03^a	0.12^b	1
FCM	0.17^c	0.12^c	0.17^c	0.30^c	0.11^c	0.23^c	0.12^a	0.03^c	0.01^c	0.03^a	0.04^a	−0.02^a	−0.12^a	0.02^b	0.21^a	0.17	0.05^a	0.05^c	0.12^a	1
TQR	0.17^b	0.25^b	0.13^a	0.20^a	0.12^a	0.31^a	0.13^a	0.04^a	0.42^b	0.05^a	0.01	0.19^a	0.12^a	−0.06^a	−0.01	0.09	0.17^a	−0.07^a	0.31^a	0.15	1
SR	−0.02^c	−0.13^c	0.11^b	0.31^a	0.11^a	0.12^a	0.14	0.02	0.05^c	0.17^a	0.13^a	0.22^a	0.13^a	0.18^a	−0.11^a	−0.20^c	0.47^a	0.13^a	0.14	0.11	−0.16	1
rk	0.19^a	0.10^a	0.14^a	0.19^c	0.11^c	0.12^c	−0.14^a	−0.12^a	−0.07^a	0.19^a	−0.09^a	−0.11^a	−0.09^a	0.30^a	0.17	0.02^c	0.02^c	0.11^a	−0.141^a	0.15	−0.03^a	0.19^a	1

Note. ^a = p < 0.01, ^b = p < 0.05, ^c = p < 0.1.

Next, the study compares mean differences between boards with and without female directors using Cohen's d and Hedges's g tests. These tests are effective for estimating mean differences regardless of sample size (Wilcox & Tian, 2011). Therefore, we create a dummy variable (1 for boards with female directors, 0 for those without) to estimate the impact of female directors on technological innovation. The Cohen's d value is 1.45, indicating a substantial effect size of boards with female directors on R&D costs. Hedges's g estimates confirm these findings. The experimental group's R&D cost is 92% higher than the control group's. Figure 1 reports the estimates, showing a significantly larger mean effect size of boards with female directors on R&D spending. Similar patterns are observed for other innovation measures, such as patent counts and innovation efficiency.

Figure 1.

Comparative Box Plot: Mean Analysis of Boards with and without Female Directors.

Regression Estimates

Table 3 provides baseline regression estimates. First, the analyses show the statistical significance of control variables concerning innovation input, output, and efficiency in columns 1, 3, and 5. The reported r-square values at the bottom indicate that these control variables explain 30.9% of the variance in R&D, 33.1% in patents, and 31.6% in innovative efficiency. Introducing female directors (FMR) in these models enhances the explanatory capacity, reflected in a higher r-square value. Columns 02, 04, and 06 report the effects of female directors on technological innovation. The presence of female directors on the board shows positive and statistically significant coefficients on all constructs of technological innovation. For R&D cost (lnRD), the female ratio on the board (FMR) is associated with a 1.29 rise (p < 0.01) in column 2. For patents (lnPat), FMR contributes 1.79 (p < 0.01), as shown in column 4. Regarding innovation efficiency (IEY), FMR has a coefficient of 1.57 (p < 0.01) as presented in column 6. The results are consistent with hypothesis 1.

Table 3.

Regression Analysis: Presence of Female Directors on the Board and Technological Innovation.

	R&D cost (InRD)		Patents (InPat)		Innovation efficiency (IEY)
	(01)	(02)	(03)	(04)	(05)	(06)
Female ratio on the board (FMR)		1.29^a		1.79^a		1.57^a
		(0.31)		(0.61)		(0.37)
Firm size (FS)	0.98^a	0.92^a	0.67^a	0.78^a	0.57^a	0.66^a
	(0.14)	(0.23)	(0.11)	(0.14)	(0.13)	(0.18)
Growth (GT)	0.21^b	0.16^c	0.13^c	0.15^c	0.32^a	0.36^a
	(0.11)	(0.09)	(0.06)	(0.08)	(0.12)	(0.13)
Profitability (ROA)	0.31^b	0.23^c	0.21^c	0.39^c	0.21^a	0.23^a
	(0.13)	(0.10)	(0.12)	(0.16)	(0.08)	(0.09)
Liquidity (LQ)	0.21^a	0.16^a	0.13^a	0.15^a	0.16^a	0.17^a
	(0.07)	(0.03)	(0.01)	(0.03)	(0.07)	(0.09)
R&D personnel (In_RDP)	0.91^a	0.83^a	0.67^a	0.72^a	0.23^c	0.33^a
	(0.17)	(0.26)	(0.13)	(0.16)	(0.13)	(0.16)
Employee efficiency (InK/L)	−0.37^b	−0.35^a	−0.13^a	−0.23^a	−0.19^b	−0.20^b
	(0.19)	(0.12)	(0.02)	(0.11)	(0.06)	(0.08)
Cash flow volatility (CFV)	−0.28^a	−0.22^a	−0.11^a	−0.21^a	−0.27^a	−0.28^a
	(0.11)	(0.07)	(0.01)	(0.05)	(0.15)	(0.16)
Govt. subsidy ratio (GSR)	0.28^a	0.24^a	0.26^c	0.23^a	0.28^c	0.29^c
	(0.11)	(0.10)	(0.13)	(0.11)	(0.11)	(0.11)
Equity incentives (EQI)	0.85^a	0.75^a	0.70^a	0.73^a	0.52^a	0.69^a
	(0.19)	(0.18)	(0.19)	(0.21)	(0.11)	(0.13)
Institutional investors (II)	0.11^a	0.10^b	0.13^a	0.14^b	0.19^b	0.26^a
	(0.01)	(0.01)	(0.02)	(0.08)	(0.12)	(0.13)
Time & industry effects	Yes	Yes	Yes	Yes	Yes	Yes
Constant	1.11^a	1.26^a	1.73^a	1.681^a	1.66	1.32
	(0.23)	(0.13)	(0.17)	(0.38)	(1.71)	(1.22)
N	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.30	0.36	0.33	0.43	0.31	0.39

Note. The parentheses show robust standard errors. ^a = p < 0.01, ^b = p < 0.05, ^c = p < 0.1.

Next, the analyses estimate the second hypothesis. As stated in Hypothesis 2, newly-appointed CEOs moderate female directors’ advisory role in fostering technological innovation. Therefore, the effects of interaction between the dummy variable of newly-appointed CEOs and the ratio of female directors in the advisory committee are evaluated. First, the validity of these interactions in the panel data is evaluated. When presenting the results of moderating effects, interaction plots provide a clear visual representation that confirms the presence or absence of interactions, thereby enhancing interpretability (Alessandri & Pattit, 2014). An interaction plot, which displays the dependent variable on the y-axis and the first independent variable on the x-axis, is used to identify and interpret interactions between two-factor variables. Significant non-parallel lines in the plot indicate an interaction. Figure 2 portrays the interaction plot for the female directors in the advisory committee and newly appointed CEOs. The lines are not parallel, confirming the interaction of female directors and newly appointed CEOs is significant under a 95% confidence level.

Figure 2.

Interaction Plot of Female Directors & Newly-Appointed CEOs.

Next, the evaluation of female directors’ advisory role in fostering technological innovation and the moderating effects of newly appointed CEOs is reported in Table 4. The estimates in columns 1, 3, and 5 indicate that both the proportion of female directors on the advisory board (FAD) and the presence of newly appointed CEOs (CNA) positively influence technological innovation. Specifically, for R&D cost (lnRD), an increase in FAD is associated with a 0.30 rise (p < 0.01) in column 1, while a newly appointed CEO adds 0.27 (p < 0.01). For patents (lnPat), FAD contributes 0.39 (p < 0.05), with CNA adding 0.38 (p < 0.01) as shown in column 3. Regarding innovation efficiency (IEY), FAD has a coefficient of 0.26 (p < 0.05) and CNA contributes 0.12 (p < 0.01) as presented in column 5.

Table 4.

Moderating Effects: Newly Appointed CEOs and Female Directors Advisory Role.

	R&D Cost (InRD)		Patents (InPat)		Innovation efficiency (IEY)
	(1)	(2)	(3)	(4)	(5)	(6)
Female director ratio on the advisory board (FAD)	0.30^a	0.33^a	0.39^b	0.47^a	0.26^b	0.29^b
	(0.14)	(0.77)	(0.18)	(0.13)	(0.11)	(0.12)
Newly-appointed CEOs (CNA)	0.27^a	0.11^b	0.38^a	0.17	0.12^a	0.11
	(0.10)	(0.03)	(0.12)	(0.10)	(0.03)	(0.22)
FAD × CNA		0.37^a		0.49^a		0.32^a
		(0.07)		(0.08)		(0.06)
Control variables	Included	Included	Included	Included	Included	Included
Time & industry effect	Yes	Yes	Yes	Yes	Yes	Yes
Constant	4.82^a	3.13^a	3.13^a	2.39^a	3.87^a	2.21^a
	(1.97)	(1.19)	(1.19)	(0.65)	(1.82)	(0.42)
N	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.37	0.38	0.44	0.45	0.40	0.41

Note. The parentheses show robust standard errors. ^a = p < 0.01, ^b = p < 0.05, ^c = p < 0.1.

In addition, the estimates in columns 2, 4, and 6 demonstrate that newly appointed CEOs significantly enhance the impact of female directors’ advisory role in fostering technological innovation. Column 2 shows that the interaction term (FAD × CNA) increases the effect of female directors’ advisory effects on lnRD by 0.37 (p < 0.01). Column 4 indicates that this interaction boosts the impact on lnPat by 0.49 (p < 0.01). Column 6 reports that newly appointed CEOs enhance the influence of female directors’ advisory effects on IEY by 0.32 (p < 0.01). These findings support hypothesis 2. The models include control variables and industry effects, with R-squared values ranging from 0.37 to 0.44, indicating moderate explanatory power and robustness of the results.

In the context of hypothesis 3, we evaluate the interaction plot to confirm the significance of the interaction between CEO power and the female directors’ monitoring role in fostering technological innovation. Figure 3 presents the graphical representation, wherein the non-parallel lines validate the significance of the interaction between female directors and CEO power at a confidence level of 95%.

Figure 3.

Interaction Plot of Female Directors & CEO Power.

Table 5 presents a comprehensive analysis of the moderating effects of CEO power on the role of female directors in fostering technological innovation. The analysis is divided into three panels: Panel A for innovation input (R&D cost), Panel B for innovation output (patents), and Panel C for innovation efficiency.

Table 5.

Moderating Effects: CEO Power and Female Directors Monitoring Role.

	CEO power constructs
	CEO Duality		CEO Education		Independent Board		CEO Incentives		Power Index (CP)
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
Panel A: Dependent variable: Innovation input – R&D Cost (InR&D)
Female director ratio on the monitoring board (FMD)	0.29^a	0.31^a	0.24^b	0.23^a	0.27^b	0.29^a	0.30^a	0.31^a	0.35^a	0.37^a
	(0.09)	(0.07)	(0.12)	(0.10)	(0.11)	(0.09)	(0.09)	(0.10)	(0.12)	(0.11)
CEO power constructs	0.17^a	0.19	0.11^b	0.15	0.13^a	0.09	0.18^a	0.13	0.25^a	0.18
	(0.04)	(0.15)	(0.06)	(0.14)	(0.03)	(0.08)	(0.04)	(0.10)	(0.11)	(0.19)
FMD × CEO power constructs		0.33^a		0.24^a		0.30^a		0.33^a		0.38^a
		(0.09)		(0.06)		(0.09)		(0.06)		(0.07)
Control & time effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Constant	2.87^a	3.98^a	2.87^a	3.81^a	2.19^a	2.78^a	3.12^a	3.81^a	3.26^c	2.93^a
	(0.67)	(0.76)	(0.66)	(0.64)	(0.48)	(0.61)	(0.71)	(0.86)	(1.74)	(1.24)
N	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.20	0.24	0.18	0.23	0.15	0.17	0.27	0.31	0.37	0.38
Panel B: Dependent variable: Innovation output – patents (InPat)
Female director ratio on the monitoring board (FMD)	0.31^a	0.32^a	0.28^b	0.32^a	0.33^b	0.34^a	0.30^a	0.32^a	0.29^a	0.32^a
	(0.09)	(0.06)	(0.12)	(0.11)	(0.07)	(0.06)	(0.09)	(0.11)	(0.09)	(0.10)
CEO power constructs	0.21^a	0.20	0.13^b	0.17^c	0.15^a	0.14^a	0.11^b	0.14	0.27^b	0.21
	(0.05)	(0.21)	(0.07)	(0.11)	(0.05)	(0.04)	(0.06)	(0.15)	(0.11)	(0.22)
FMD × CEO power constructs		0.33^a		0.33^a		0.37^a		0.35^a		0.33^a
		(0.08)		(0.06)		(0.08)		(0.11)		(0.08)
Control & time effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Constant	2.17^a	4.65^a	1.73^a	2.60^a	2.87^a	1.63^a	1.11^a	1.15^a	3.98^a	3.62^a
	(0.48)	(0.82)	(0.39)	(0.59)	(0.61)	(0.57)	(0.31)	(0.26)	(1.56)	(0.85)
N	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.12	0.13	0.18	0.19	0.21	0.22	0.27	0.33	0.48	0.45
Panel C: Dependent variable: innovation efficiency (IEY)
Female director ratio on the monitoring board (FMD)	0.31^a	0.34^a	0.42^b	0.44^a	0.41^a	0.44^a	0.45^a	0.47^a	0.45^b	0.48^a
	(0.09)	(0.07)	(0.14)	(0.11)	(0.15)	(0.12)	(0.13)	(0.14)	(0.16)	(0.13)
CEO power constructs	0.10^a	0.12	0.10^a	0.09	0.10^a	0.11	0.13^a	0.14	0.14^a	0.11
	(0.04)	(0.14)	(0.03)	(0.11)	(0.03)	(0.10)	(0.03)	(0.16)	(0.07)	(0.13)
FMD × CEO power constructs		0.35^a		0.45^a		0.46^a		0.48^a		0.49^a
		(0.11)		(0.12)		(0.13)		(0.14)		(0.15)
Control & time effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Constant	1.11^b	1.40^b	1.28^b	2.41^b	1.11^b	1.40^a	1.11^b	2.47^a	1.61^b	1.47^b
	(0.78)	(0.59)	(0.35)	(0.55)	(0.60)	(0.24)	(0.30)	(1.04)	(0.41)	(0.28)
N	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.20	0.20	0.23	0.24	0.31	0.34	0.34	0.37	0.40	0.41

Note. The parentheses show robust standard errors. ^a = p < 0.01, ^b = p < 0.05, ^c = p < 0.1.

In Panel A, the coefficients for female directors (FMD) are consistently positive, ranging from 0.23 (p < 0.10) to 0.37 (p < 0.01), indicating that the presence of female directors on the monitoring committee is associated with increased R&D investment. The various CEO power constructs also show positive and significant effects on R&D costs. For example, the coefficient for CEO duality is 0.17 (p < 0.01), for CEO education is 0.11 (p < 0.05), and for the power index (CP) is 0.25 (p < 0.01). The interaction terms between FMD and CEO power constructs are all positive and significant, suggesting that the presence of powerful CEOs enhances the monitoring role of female directors in promoting R&D investment. These interaction coefficients range from 0.24 (p < 0.10) to 0.38 (p < 0.01), with the term for CEO duality being 0.33 (p < 0.01) and for the power index (CP) being 0.38 (p < 0.01). The estimates in Panels B and C follow a consistent pattern. These results provide statistical support for Hypothesis 3.

Robustness

Ensuring the robustness of our findings can validate the reliability and consistency of the observed effects of female directors on technological innovation. Robustness checks help to confirm that our results are not merely artifacts of specific sample characteristics or model specifications. In particular, robustness enhances the generalizability of the findings across different contexts and settings.

The first concern that may interrupt the effects of female directors on technological innovation when their representation is tokenistic, leading them to mimic male directors’ behavior and adopt non-conciliatory attitudes (Torchia et al., 2011). This raises questions about the validity and generalizability of our results when firms only maintain a token commitment to female directorship. Therefore, it is essential to evaluate scenarios where female directors are not marginalized but establish a critical mass within the boardroom. Critical mass refers to the minimum number of female directors necessary to influence decision-making and strategic management effectively (Poletti-Hughes & Briano-Turrent, 2019).

Existing literature highlights the importance of a critical mass of women directors in various aspects of corporate governance, such as sustainable investment, firm performance, corporate social responsibility, and risk-taking (Joecks et al., 2013; Torchia et al., 2011). Gender composition is categorized into groups: uniform, skewed, tilted, and balanced. Token representation occurs when male directors dominate the boardroom by up to 80%, resulting in a skewed board. To analyze this, we introduce a dummy variable, FTB, which equals one when there is at least one female director with less than 20% representation and zero otherwise.

By interacting with the ratio of female directors with FTB, we evaluate whether outcomes persist when women are merely tokens on the board. The results in Table 6, Panel A, shows negative coefficients for FTB, indicating that a male-dominated environment diminishes the influence of female directors on technological innovation. Panel B explores the influence of female directors on technological innovation when achieving critical mass in the boardroom. A dummy variable, FCM, representing female directors’ critical mass, is introduced and interacts with the female ratio on the board. Coefficients for FCM are consistently positive and statistically significant at a one percent confidence level, with even higher significance for the interaction term (FCM × FMR). This underscores the empowering effect of achieving a critical mass of female directors across organizational domains, consistent with existing literature.

Table 6.

Threshold of the Presence of Female Directors on the Board: A Comparative Analysis.

	R&D Cost (InRD)		Patents (InPat)		Innovative Efficiency (IEY)
	(01)	(02)	(03)	(04)	(05)	(06)
Panel A: Female directors token representation (male-skewed board when female director ratio is less than 20% on the board)
Female ratio on the board (FMR)	1.15^a	1.16^a	1.53^a	1.58^a	1.37^a	1.38^a
	(0.29)	(0.30)	(0.41)	(0.44)	(0.29)	(0.33)
Female director as a token on board (FTB)	−0.13^a	−0.18^a	−0.19^a	−0.12^a	0.18^a	−0.19^a
	(0.03)	(0.05)	(0.03)	(0.04)	(0.06)	(0.08)
FMR × FTB		−0.09^c		−0.08^b		−0.07^b
		(0.04)		(0.03)		(0.03)
Control & Time effects	Yes	Yes	Yes	Yes	Yes	Yes
Constant	1.92^a	1.22^a	1.18^a	1.29^a	1.27	1.28
	(0.47)	(0.24)	(0.38)	(0.47)	(1.71)	(1.81)
N	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.31	0.31	0.30	0.31	0.32	0.32

Panel B: Critical mass representation (titled board when female director ratio is at least 40% on the board)
Female ratio on the board (FMR)	1.19^a	1.12^a	1.28^a	1.29^a	0.58^a	0.57^b
	(0.47)	(0.53)	(0.37)	(0.41)	(0.13)	(0.14)
Female director critical mass (FCM)	0.12^a	0.11^b	0.13^a	0.13^a	0.16^b	0.17^c
	(0.04)	(0.05)	(0.02)	(0.02)	(0.09)	(0.09)
FMR × FCM		1.47^a		1.85^a		0.97^a
		(0.39)		(0.73)		(0.37)
Control & Time effects	Yes	Yes	Yes	Yes	Yes	Yes
Constant	1.38^a	1.332^a	1.23^a	1.32^a	1.67	1.52
	(0.13)	(0.15)	(0.76)	(0.85)	(1.97)	(1.81)
N	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.36	0.36	0.44	0.44	0.41	0.41

Panel C: Balanced representation (balanced board when female directors ratio is at least 50% on the board
Female ratio on the board (FMR)	1.21^a	1.13^a	1.29^a	1.32^a	0.51^a	0.61^b
	(0.25)	(0.29)	(0.30)	(0.27)	(0.10)	(0.10)
Female director balanced representation (FBR)	0.13^a	0.13	0.14^a	0.11	0.11^a	0.19^a
	(0.04)	(0.14)	(0.04)	(0.12)	(0.02)	(0.03)
FMR × FBR		1.58^a		1.87^a		0.98^a
		(0.27)		(0.34)		(0.18)
Control & Time effects	Yes	Yes	Yes	Yes	Yes	Yes
Constant	1.73^a	1.29^a	1.33^a	1.22^a	1.87^a	1.36^a
	(0.47)	(0.39)	(0.46)	(0.14)	(1.31)	(0.25)
N	14,010	14,010	14,010	14,010	14,010	14,010
R-squared	0.34	0.37	0.33	0.47	0.42	0.47

Note. The parentheses show robust standard errors. ^a = p < 0.01, ^b = p < 0.05, ^c = p < 0.1.

Finally, we reevaluate the findings in firms with a balanced board, where female directors constitute at least fifty percent but not more than sixty percent. Our analysis exclusively considers boards with balanced representation, ranging from at least fifty percent to a maximum of sixty percent of female directors, omitting those with a skewed composition where women dominate the board positions. A dummy variable for female directors’ balanced representation (FBR) is introduced and interacts with the female directors’ ratio. Panel C reveals significantly positive and substantially higher coefficients for the interaction term (FBR × FMR), emphasizing that balanced representation of female directors enhances their role and significantly empowers their influence on technological innovation.

The findings suggest that token representation of female directors diminishes their impact on technological innovation. However, when female directors reach a critical mass, their influence on R&D investment, patent output, and innovation efficiency becomes significantly positive. Additionally, balanced representation, where female directors make up a substantial portion of the board, further enhances their role in promoting technological innovation. The findings underscores the importance of not just including female directors but ensuring they have a substantial and meaningful presence on the board to fully leverage their contributions to innovation.

Endogeneity

Given the heightened significance of governance dynamics in the innovation process, firms may strategically appoint female directors as a signaling mechanism for effective governance, particularly in the face of substantial agency risk. The presence of women on the board is likely a deliberate choice by firms to signal fair inclusion and quality governance, introducing the possibility of reverse causality in our regression analysis. To mitigate endogeneity risks, the study predicts unexplained female directorship by regressing confounding factors influencing the appointment of female directors, such as firm value, growth, risk, profitability, age, and institutional ownership. The test variable captures firm-specific factors rather than the effects of female directors on technological innovation. The results in Table 7, Column 1, demonstrate that confounding factors significantly explain female directors’ appointments. Subsequently, the study estimates the predicted variable, unexplained female directorship, replacing the explanatory variable in columns 2 to 4. The coefficient value of FMR_predicted is consistently significant and positive, affirming the robustness of the main conclusion regarding the causal association between female directors and technological innovation. Next, employing an instrumental variable approach, we adopt the ratio of male directors on the board with one female director (MB_1Female) as the instrumental variable (Adams & Ferreira, 2009; Chen et al., 2021). In Panel B, Column 1 presents the first-stage regression results, indicating a positive and significant coefficient value for MB_1Female. Subsequently, the second-stage regression estimates in columns 2 to 4 demonstrate the significance of the LM statistic at the one percent confidence level and a Wald F value surpassing the critical values of Cragg-Donald, affirming the perfect identification and weak correlation of the instrumental variable with the endogenous regressor. The Hansen-J test's p-value exceeding 10% supports the instrumental variable's validity. The positive and significant coefficient value for FMR in the second-stage regression reaffirms that endogeneity does not compromise the study's primary conclusion. Finally, the propensity score matching technique is applied to robust the findings. The propensity score for each sample firm is estimated based on all previous confounding factors. The study matches the values of the observations without women directors. Thus, propensity score-matched samples are generated using a 1–3 propensity score. Next, the study robust the baseline regression model using a propensity score-matched sample. Panel C reports the findings, and the nearest neighbor treatment coefficient value remains positive and significant. It shows that the effects of female directorship on technological innovation remain unchanged.

Table 7.

Endogeneity.

	I Stage	II Stage
	FMR	InRD	InPat	IEY
	(1)	(2)	(3)	(4)
Panel A: Prediction Modelling
Female ratio on the board (FMR_[Predicted])		1.17^c	1.29^c	0.85^a
		(0.43)	(0.63)	(0.21)
Profitability (ROA)	0.05^a
	(0.01)
Tobin's Q ration (TQR)	0.03^a
	(0.01)
Stock return (SR)	0.02^b
	(0.01)
Firm growth (GT)	0.04^b
	(0.03)
Risk (rk)	0.06^c
	(0.03)
Firm size (SZ)	−0.02^a
	(0.01)
Firm age (Age)	−0.03^b
	(0.02)
Institutional investors (II)	0.03^a
	(0.01)
Control variables		Included	Included	Included
Time & industry effects	Yes	Yes	Yes	Yes
Constant	0.43^a	−2.41^a	−2.64^a	−3.41^a
	(0.02)	(0.96)	(1.68)	(1.83)
N	14,010	14,010	14,010	14,010
R-squared	0.13	0.37	0.44	0.41

Panel B: Instrumental variable approach
	I-Stage	II-Stage (GMM estimation)
	FMR	InRD	InPat	IEY
Board with one female director (MB_1Female)	0.23^a
	(0.11)
Female ratio on the board (FMR)		2.19^a	2.98^a	1.92^a
		(0.71)	(0.81)	(0.12)
Control variables	Included	Included	Included	Included
Time and industry effect	Yes	Yes	Yes	Yes
Constant	0.42^a	3.35^b	2.87^a	3.17^a
	(0.02)	(1.68)	(0.32)	(1.45)
N	14,010	14,010	14,010	11,337
R-Squared	0.28	0.39	0.45	0.42
(Kleibergen-Paap rk LM statistic)		555.91^a	467.76^a	504.59^a
Cragg-Donald Wald F statistic		2953.51	3541.87	2414.07
Hansen J Statistics (Chi-sq(1) P-val)		0.81	0.87	0.62

Panel C: Propensity score matching
	InRD	InPat	IEY
Nearest neighbor treat	2.14^a	2.76^a	1.02^a
	(0.47)	(0.87)	(0.45)
Control variables	Included	Included	Included
Time and industry effect	Yes	Yes	Yes
Constant	−7.71	−3.21^a	−4.32^a
	(1.90)	(1.32)	(1.12)
N	1,443	1,443	1,443
R-squared	0.36	0.34	0.27
ATT	1.14^a	1.12^b	0.89^a
	(0.37)	(0.21)	(0.30)
t-value	13.63	16.87	13.83
N (Including n. treat 641)	1,443	1,443	1,443

Note. The parentheses shows robust standard errors. ^a = p < 0.01, ^b = p < 0.05, ^c = p < 0.1.

Discussion

The study primarily addresses the research problem of identifying human factors that contribute to superior innovation outcomes. By evaluating the holistic role of female directors in various dimensions of technological innovation, such as R&D costs, patent counts, and the innovation efficiency ratio of patents over R&D, it becomes clear that female directors positively influence all these constructs. These findings suggest that the presence of female directors in the boardroom is a critical component of human capital, essential for achieving superior innovation outcomes. Their presence enhances innovation efficiency and mitigates R&D performance issues, functioning as an effective mechanism to ensure the disciplined utilization of technological capital and instilling confidence in investors regarding the productive use of their investments.

We examined the fiduciary role of female directors in this context, highlighting their excellence in advising and monitoring the innovation process. The study also critically evaluates the enabling environment that can bolster their pivotal role in fostering technological innovation. Specifically, we assessed their interaction with key CEO dynamics, including instances where CEOs are newly appointed and when they hold substantial power. The findings indicate that these dynamics act as moderating factors. Newly appointed CEOs are more inclined to reinforce the advising process and moderate the advisory roles of female directors. Additionally, powerful CEOs are better equipped to strengthen the board's monitoring function and support female directors in this capacity. Thus, CEO dynamics play a critical role in reinforcing the presence and effectiveness of female directors on the board.

Furthermore, the study evaluates the role of female directors in fostering technological innovation from the perspectives of token representation and critical mass. The findings reveal that a critical mass of female directors is a crucial consideration in the context of board composition. Token representation, on the other hand, may hinder their active involvement in strategic initiatives. Findings underscore the importance of achieving a critical mass to ensure that female directors can actively and effectively contribute to strategic decision-making processes and foster technological innovation.

Research Contributions

Our contributions to the literature on innovation are threefold. First, we advance the understanding of human factors in technological innovation, highlighting how superior outcomes can arise from human dynamics within organizations. This study emphasizes the importance of a comprehensive approach that holistically portrays human factors in innovation, encompassing their involvement from initiating R&D to achieving high innovation performance. Such an approach better captures how human dynamics initiate innovation and manage it for optimal results. In particular, we focus on the role of female directors, demonstrating that their influence extends beyond mere participation in R&D investment to ensuring these investments lead to superior innovation outcomes and efficiency. We offer a more comprehensive approach to understanding the necessity of female directors’ substantial and meaningful presence on corporate boards. Therefore, our advocacy for gender diversity in strategic leadership strengthens existing research on the crucial role of corporate leadership in innovation management, particularly regarding innovation efficiency.

Second, this study advances agency theory by providing a nuanced perspective on mitigating agency risk. Effective governance, which includes the crucial role of women in top leadership positions, particularly in their monitoring and advisory roles, has been identified as a key mechanism for reducing agency risk. Our study furthers this understanding by exploring the collaborative dynamics between CEOs and female directors, demonstrating that their interaction forms an effective team instrumental in addressing agency costs. Through a comprehensive evaluation of this interaction across various stages of the innovation process, from the initiation of R&D initiatives to achieving high efficiency and superior outcomes, we advance agency theory by highlighting the importance of collaborative dynamics in the top echelons. These collaborative dynamics emerge as a powerful mechanism to streamline innovation activities and mitigate agency costs.

Finally, our findings bring fresh insights into UET by demonstrating that when the ambitions of CEOs and the characteristics of directors effectively align, superior outcomes originate from their teamwork. For instance, the findings reveal that newly appointed CEOs, who often bring fresh perspectives and strategic visions, effectively leverage the advisory roles of female directors to drive technological innovation. Likewise, the CEO power is more likely to align with female directors in the monitoring committee to ensure fair inclusion and respect the diverse viewpoints. However, this synergy results in a more robust and comprehensive innovation strategy, as CEOs moderate female directors’ valuable insights and oversight that complement their strategic efforts. The study provides a deeper understanding of how diverse top management teams can work together to enhance strategic oversight and operational efficiency, crucial for successful innovation. This contribution not only enriches UET but also offers practical insights into the importance of fostering collaborative dynamics within leadership teams to achieve superior innovation outcomes.

Practical Implication

The practical implications of our findings manifest in enhancing the presence of female directors ratio, at least up to critical mass, to achieve superior innovation outcomes. Organizations should prioritize gender diversity in their board composition to enhance innovation efficiency, mitigate R&D performance issues, and instill investor confidence in the productive use of investments. In particular, companies can benefit from appointing female directors to key fiduciary roles where they can effectively oversee and guide innovation initiatives. This approach not only enhances the disciplined utilization of technological capital but also strengthens governance mechanisms. The interaction between CEOs and female directors is critical. Organizations should consider these dynamics when structuring their leadership teams, ensuring that the collaborative potential between CEOs and female directors is maximized. By doing so, companies can create an enabling environment where female directors can fully exercise their advisory and monitoring roles.

Limitations and Directions for Future Research

The study has certain limitations that warrant a cautious interpretation of the findings. First, quantifying innovation output solely based on patent counts may overlook the nuanced variations in the quality and market relevance of patented technologies. Second, the analytical approach assumes linearity in the relationship between the presence of female directors and innovation outcomes. However, robustness tests utilizing cutoffs suggest potential non-linearities, indicating that the impact of female directors on innovation may vary across different levels of representation. This implies that the linear models used in the primary analyses may oversimplify the complex dynamics at play, potentially missing nuanced effects and variations in influence. Additionally, the study's reliance on secondary data sources for variables, such as patent data and board composition, introduces the possibility of measurement error and raises concerns regarding data accuracy and completeness. The correlational nature of the study design limits the ability to establish causal relationships and despite efforts to address endogeneity, residual confounding factors may persist, affecting the internal validity of the findings.

Future research could benefit from incorporating more nuanced measures of innovation output, exploring non-linear modeling approaches, and considering additional contextual and external factors that may influence the observed relationships.

Concluding Remarks

This study investigates the human factors contributing to superior innovation outcomes, focusing on the role of female directors in technological innovation. By examining dimensions such as R&D costs, patent counts, and innovation efficiency, the research demonstrates that female directors positively impact these areas. Their presence on the board enhances innovation efficiency, mitigates R&D performance issues, and ensures disciplined utilization of technological capital. The study also highlights the critical role of CEO dynamics, with newly appointed and powerful CEOs moderating and supporting the advisory and monitoring roles of female directors. In addition, the findings emphasize the importance of achieving a critical mass of female directors to enable their effective contribution to strategic decision-making and innovation processes.

Footnotes

Data Availability

The data supporting the findings of this research are openly available in CSMAR at .

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author/authors received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Umeair Shahzad

Author Biographies

Umeair Shahzad is an Assistant Professor at the School of Accounting, Shanghai Lixin University of Accounting and Finance, P.R. China. His research has been published in reputable journals such as the International Journal of Finance and Economics, Technology Analysis & Strategic Management, Managerial and Decision Economics, Spanish Journal of Finance and Economics, Journal of Business Economics and Management, Economics of Innovation and New Technology, Journal of Environment and Development, and Journal of Applied Economics. His research interests encompass financial theories, technological innovation, enterprise governance, digital ecosystems, and entrepreneurship.

Zhengying Dong is a professor of MOT and Entrepreneurship, Vice Director of the Global Innovation & Entrepreneurship Lab of Shanghai Jiaotong University, and Director of the MBA program in the Management School at Shanghai Jiao Tong University. His research interests lie in product innovation management, Strategies for new venture growth, technology transfer, and Knowledge Management. He has written three books on technology transfer and technological intermediary, including one published in multiple editions.

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