Board's informal hierarchy: influences on enterprise innovation quality

Delin Meng · Yanxi Li · Lan Wang

12 citations0/0 files storedManagement Decision

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Corporate Finance and Governance Gender Diversity and Inequality Organizational Management and Leadership

Abstract

Purpose Utilizing the expectation states theory in sociology, this study probes into the influence of the board's informal hierarchy on the quality of enterprise innovation, originating from the perspective of internal directorial interactions, while analyzing the boundary effects exhibited by the nature of property rights and the intensity of geo-culture. Design/methodology/approach The study selects China's A-share listed companies from 2008 to 2021 as the research sample, employing the Tobit regression analysis method to scrutinize the hypotheses presented in the text. Findings The regression results demonstrate a positive correlation between the board's informal hierarchy and the enterprise innovation quality (EIQ). Upon introducing variables specific to property rights and geographical culture, the authors found that in comparison to non-state-owned enterprises (non-SOEs), the influence of the board's informal hierarchy on the quality of corporate innovation is diminished in SOEs. Conversely, the intensity of geo-culture across Chinese provinces enhances their mutual positive influence. In the additional analysis, the authors also found that the elevation of corporate risk tolerance is a significant pathway for the positive effect of the board's informal hierarchy on EIQ. Moreover, this positive influence is more profound in high-tech enterprises, businesses implementing equity incentive plans and companies that have subscribed to director and officer liability insurance. Originality/value The findings not only deepen the understanding of how the board's internal status characteristics influence corporate decision-making but also enrich the application scope of expectation states theory. Furthermore, this study offers valuable guidance for optimizing innovation decision-making by adjusting the personnel structures of corporate boards.

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