THREE ESSAYS ON FIRM INNOVATION EFFORT: THE RELATION WITH CORPORATE GOVERNANCE, WORKFORCE DIVERSITY AND CEO DOMINANCE

Abstract

This dissertation investigates the innovation behavior of U.S. publicly listed companies and is comprised of three studies. The first study examines whether innovation effort (i.e., investment in R&D and R&D intensity) is greater for firms showing better governance performance, and the overall impact this relationship has on firm performance. The results show a significantly negative relationship between corporate governance performance and firm innovation proxies, and no positive mediation effect of innovation effort on firm performance. The second study examines whether innovation effort is greater for firms that have stronger workforce diversity and the overall impact this relationship has on firm performance. The results show a significantly positive relationship between workforce diversity and innovation effort, but again no mediation effect of innovation effort on firm performance. And lastly, the third study addresses whether innovation effort is lower for firms exhibiting signs of higher CEO dominance and whether such CEOs can be incentivized to pursue more innovation projects with equity-linked compensation. The results show a significantly negative relationship between CEO pay slice and firm innovation effort, implying that firms with more dominant CEO’s tend to have lower innovation intensity. On the other hand, CEO equity-based incentives and firm innovation effort show a significantly positive relationship, illustrating a possible mechanism to alleviate the effect of CEO dominance on innovation.