Journal
ASIA PACIFIC JOURNAL OF MANAGEMENT
Volume 39, Issue 1, Pages 103-148Publisher
SPRINGER
DOI: 10.1007/s10490-020-09749-3
Keywords
Innovation; Academy fellow independent directors; Human capital theory; Ownership; Government intervention
Categories
Funding
- National Natural Science Foundation [71602191, 72072183, 71702193]
- MOE (Ministry of Education in China) Project of Humanities and Social Sciences [20YJC630063]
- Fundamental Research Funds for the Central Universities of Zhongnan University of Economics and Law
- Australian National University through a College of Business and Economics Research Committee Grant
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This study utilizes the human capital theory to investigate how independent directors' human capital affects innovation investment and outcomes in Chinese firms. The research shows that academy fellow independent directors have a positive impact on innovation activities in non-state-owned enterprises, but this effect diminishes in the presence of government intervention and political risk.
Drawing on human capital theory, this paper develops a contingency approach to explore how independent directors' scarce human capital affects innovation investment intensity and innovation outputs in the Chinese context. Controlling for the presence of ordinary technical independent directors (TIDs) and a range of other factors, we find that academy fellow independent directors (AFIDs) have an incremental positive effect on innovation investment intensity and innovation outputs, and that this effect exists only for non-state-owned enterprises (non-SOEs), which are more constrained in their ability and resources to pursue value-enhancing innovation activities. Our channel analyses suggest that AFIDs play a strong resource provision role in enhancing innovation. However, their positive role in promoting impactful innovation activities diminishes when they face intensified government intervention and political risk. We clearly document that regulations that are designed to impose only intense external monitoring of independent directors may have unintended negative consequences on innovation, particularly when firms' demands for resource provision are intense, as is the case with firm innovation.
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