Women in leadership positions and firm innovation: Are there differences between countries?

Nussbaum, Sara Luisa Article Women in leadership positions and firm innovation: Are there differences between countries? Junior Management Science (JUMS) Provided in Cooperation with: Junior Management Science e. V. Suggested Citation: Nussbaum, Sara Luisa (2024) : Women in leadership positions and firm innovation: Are there differences between countries?, Junior Management Science (JUMS), ISSN 2942-1861, Junior Management Science e. V., Planegg, Vol. 9, Iss. 4, pp. 1901-1916, https://doi.org/10.5282/jums/v9i4pp1901-1916 This Version is available at: https://hdl.handle.net/10419/308470 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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Sara Luisa Nussbaum, Women in Leadership Positions and Firm Innovation: Are There Differences Between Countries? Julian Friedrich Joswowitz, Spitzeder, Schmider, Marsalek: What Role Does the Human Factor Play in Accounting Scandals? 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This is an Open Access article distributed under the terms of the CC-BY-4.0 (Attribution 4.0 International). Open Access funding provided by ZBW. ISSN: 2942-1861 Women in Leadership Positions and Firm Innovation: Are There Differences Between Countries? Sara Luisa Nussbaum University of Augsburg Abstract The presence of women on corporate boards has attracted significant attention in recent years due to ongoing political discourse concerning initiatives such as gender quotas in managerial and boardroom positions. But how does the proportion of women on corporate boards influence firm innovation? This paper examines this question with reference to the direct and indirect effects of female supervisory board representation. The paper draws on a sample of 60 French firms and is framed in upper echelons theory. In analyzing the proportion of women directors, the paper aims to understand better the relationship between firm innovation and board seats occupied by women. The results suggest that firm innovation is not related to female board representation, which contrasts with empirical evidence that has found a positive relationship for 105 German firms. This deviation from established findings highlights the complexity inherent in understanding the impact of gender diversity on firm-level outcomes and underscores the need for context-specific examinations in this domain. Keywords: corporate boards; female representation; firm innovation; gender diversity; strategic leadership 1. Introduction In the wake of globalization and the interconnectedness of areas that affect our everyday lives, new challenges are constantly emerging. Firms operate in an increasingly complex VUCA world characterized by rapid unforeseen shocks, technological changes, and digital disruption. This is making the business environment more dynamic, unpredictable, and interconnected. So, how can firms ensure success and continued growth in these times of constant change? Firm innovation has been understood for decades as an approach to achieve a positive impact on the natural life cycle of a company through entrepreneurial activities driving firm I want to express my sincere gratitude to all those who supported and inspired me during the writing process of my bachelor’s thesis. Special appreciation is extended to Prof. Dr. Susanne Warning and Ms. Patricia- Isabella Aich for the opportunity to write my thesis at the Department of Global Business and Human Resource Management and their invaluable guidance, meticulous feedback, and unwavering support throughout the research process. Additionally, I extend my gratitude to the faculty members whose insightful discussions and constructive criticisms have significantly enriched my understanding and the quality of this thesis. competitiveness, productivity, and hence, firm value (Griffin et al., 2021, p. 124). In times of economic and societal development, the concerns of various stakeholders have led to an additional challenge for firms, which requires their decisionmakers to assume corporate responsibility for diversity. This demand has been popularized in recent years by the political discussion on women‘s quotas in management or boardrooms (Alshirah et al., 2022, p. 2; Grosvold et al., 2016, pp. 1158– 1159). In 2003, Norway was the first country to implement a board gender quota in publicly listed Norwegian firms, requiring a minimum of 40 percent of each gender (Grosvold et al., 2007, p. 349). Since this was associated with an increase in the innovation output of Norwegian firms, researchers suggested that the impact of board gender diversity on corporate innovation is likely causal (Griffin et al., 2021, p. 125). However, firms face a paradoxical situation, as diversity is seen as both a source of creativity and innovation and of misunderstanding and conflict (Bassett-Jones, 2005, p. 169). Accordingly, researchers still do not agree about the extent to which diversity stimulates firm innovation. Against this background, the question arises of how the perspectives on DOI: https://doi.org/10.5282/jums/v9i4pp1901-1916 © The Author(s) 2024. Published by Junior Management Science. This is an Open Access article distributed under the terms of the CC-BY-4.0 (Attribution 4.0 International). Open Access funding provided by ZBW. S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-19161902 diversity’s impacts can be reconciled. Given the magnitude of political interventions and the expectations placed on female directors, it is critical to gain a better understanding of the state of literature to inform policy and shape expectations about the impact of gender-diverse boards on corporate outcomes, such as firm innovation. Therefore, it seems timely that firm innovation is analyzed with respect to female board participation. The purpose of this paper is, therefore, to provide a comprehensive discussion of the literature on the relationship between female directors and firm innovation by addressing the following research question: How does the proportion of women on corporate boards influence firm innovation? In this context, the paper refers to corporate boards as the highest leadership level in organizational structures. More specifically, the study focuses on supervisory boards, as they exert great influence on the executive board which shape a firm’s corporate vision (Wu et al., 2021, p. 2) and are key determinants of organizational culture and innovation orientation (Schein, 1985, pp. 316–317) Although not involved in day- to-day business, the supervisory board affects the firm’s innovation strategy in several ways: First, the supervisory board monitors the executive board and appoints and dismisses its members (Kim et al., 2018, p. 1257). Second, the supervisory board sets targets for the executive board members and determines their remuneration. Third, the supervisory board also advises the executive board, for instance, on innovationrelated topics, and must approve fundamental strategy decisions before implementation (Jäger et al., 2021, p. 675). The study is framed in Hambrick and Mason (1984) upper echelons theory, which suggests that leaders’ characteristics partially shape corporate decision-making and, thus, organizational outcomes, such as innovation activity. Referring to gender differences in cognition, the paper hypothesizes that female transformational leadership style is an underlying mechanism through which women on boards positively affect innovation. The hypothesis is tested based on an ordinary least squares (OLS) regression, using a sample of 60 French firms listed on one of the French exchange stock markets. To obtain data on the proportion of women directors, the analysis relies on data by Refinitiv Eikon (2023). As a proxy for innovation, the number of patents issued in 2022 is used with data provided by World Intellectual Property Organization (2023) and European Patent Office (2023). In contrast to previous studies, the results do not show a statistically significant link between female directors and firm innovation, so the research design must be reconsidered. The analysis is, therefore, compared to a panel data study by Joecks et al. (2023), using a sample of 105 publicly listed German firms and finding that female directors positively influence a firm’s innovation performance. The remainder of the paper is organized as follows: Section 2 discusses drivers of firm innovation orientated on the main argumentation lines presented in the literature. The paper emphasizes direct and indirect effects, addresses the diversity-innovation paradox, and outlines contextual factors affecting firm innovation performance. Section 3 develops the theoretical framework supporting the relationship between women directors and firm innovation, from which a corresponding hypothesis is derived. Section 4 thus provides an empirical analysis and compares results to existing empirical evidence. Section 5 presents the main conclusions, draws theoretical and practical implications for women’s inclusion in leadership, and identifies limitations and future lines of research on the upper echelons. 2. Literature Discussion: Drivers of Firm Innovation 2.1. Influence of Women on Corporate Boards on Firm Innovation 2.1.1. Direct Effects of Female Board Representation on Firm Innovation Corporate innovation capacities and capabilities require a profound knowledge base, systematic knowledge integration, and a suitable leadership style, which means that diversified human capital plays a non-negligible role in firm innovation (OECD/Eurostat, 2019, p. 147). Research from psychology (e.g., Silverman, 2003 and management (e.g., Croson and Gneezy, 2009) found evidence of gender differences in preferences regarding the attitude toward risk, time horizon, and personal values. These gender-specific preferences directly affect information processing, decisionmaking, managerial behavioral tendencies, and, thus, leadership styles. This, in turn, has implications for corporate decisions and implies that gender-based approaches to innovation exist and that the direct effects of gender diversity on a firm’s innovation performance can be identified. In principle, gender diversity, i.e., a greater presence of women on firm level, expands the knowledge base and leads to greater knowledge differentiation and organizational decisions of higher quality. This is because more heterogeneous groups with differing points of view consider a more comprehensive set of alternatives (Dai et al., 2019, p. 509; Dezsö and Ross, 2012, p. 1075) and capitalize on atypical ways of exploring and exploiting innovation opportunities (Guerrero, 2022, p. 38). Heterogeneity in knowledge base thus not only leads to diverse perspective and debates over tasks but also stimulates more diverse approaches to solutions (Dai et al., 2019, p. 509). Women contribute to diversity through their life experiences by having additional insights on key strategic issues, notably in relation to female employees, consumers, and trading partners (Dezsö & Ross, 2012, p. 1075). Men and women also have different socialization experiences, for instance, in their professional careers and social networks, so gender, among other demographic backgrounds, explains differences in intellectual capital, such as human and social capital (Dai et al., 2019, p. 509). Increased female presence accordingly is likely to enhance the diversity of human and social resources, helping identify business opportunities and develop innovative ideas (Guerrero, 2022, p. 35). This is supported by the resource dependency theory cultivating that firms should attract board members with complementing resources that bring additional human and social capital to the S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-1916 1903 company (Siciliano, 1996, p. 1313), and by Becker (1962, p. 49) human capital theory, emphasizing that an individual’s education, skills, and experience enhance organizational capabilities. Given the more differentiated knowledge, gender diversity provides potential during the exploration and exploitation of entrepreneurial opportunities, stimulating firm innovation (Guerrero, 2022, p. 38). This applies notably to tasks requiring a high level of information processing, such as board decisions (Van Knippenberg et al., 2004, p. 1012). Experimental studies have not found significant differences in innovativeness and creativity between women and men entrepreneurs. However, women and men differ in their cognitive information processing styles and approach to knowledge integration, contributing to opportunity identification and recognition (DeTienne & Chandler, 2007, p. 379). In this context, Chung and Monroe (1998, p. 268) refer to the psychological phenomenon of confirmation bias, which indicates the tendency to accept information that confirms rather than refutes their current thinking. Accordingly, men tend to encode fewer details and are more likely to ignore non-confirming information (Meyers-Levy & Maheswaran, 1991, p. 63). In contrast, women are more attentive to subtle cues and more sensitive and tolerant of information that is contrary to established mental schemas and paradigms, allowing for processing information more comprehensively (Chung & Monroe, 1998, p. 266). According to Dai et al. (2019, p. 509), women can recognize ideas dispersed among team members more easily, connect them and identify similarities. Men’s information processing style is therefore referred to as “item-specific processing”, whereas the female is described as “relational processing” (Putrevu, 2001, pp. 7–8). This also explains the higher monitoring capacity of women, which increases the accountability of board members and their attendance at board meetings (Adams & Ferreira, 2009, p. 292). Furthermore, women promote consensual decision-making and assume a mediating role in the event of disagreements (Joecks et al., 2019, p. 24). According to agency theory (Jensen & Meckling, 1976, p. 308), this helps resolve conflicts of interest between agents (e.g., executives) and principals (e.g., shareholders), by integrating the knowledge of both parties (Brahma et al., 2020, p. 5707). As a result, the increase in women’s presence promotes openness toward unfamiliar information, which may at first disrupt current practices and procedures but improve knowledge integration in the long term. Since a firm’s ability to improve its innovation performance depends on its capacity to manage knowledge successfully, it can capitalize on both female and male information processing styles by forming gender-diversified teams (Dai et al., 2019, p. 510). This means that item-specific information processing, typically attributed to men, is complemented by female attention to non-confirming information. More female presence, therefore, enables a firm to appropriately consider the signals and information by transferring them to others for item-specific processing. The more interconnected knowledge base provides a broader range of information for this focused investigation, and further exploration of details in gender-mixed teams can prevent information crucial to the development of ideas from being overlooked, and thus, missing important impulses to innovation processes (Dai et al., 2019, p. 510). In addition, differences in male and female cognition not only result in complementary information processing styles, but also shape their leadership styles. Being more sensitive to relational information processing, women tend to manage in less hierarchical but more democratic and participatory ways (Dai et al., 2019, p. 510). Female leaders thus encourage the exchange of information and emphasize participation, characterizing their interactive style (Johansen, 2007, p. 271). Subsequent studies also concluded that women tend to exhibit a transformational style with emphasis on communication, collaboration, and cooperation, whereas men tend to correlate more with a transactional style with top-down procedures, task-oriented command, and control (Wu et al., 2021, p. 2). In contrast to the male supervisory approach, female supportive style therefore promotes a sense of self-determination, increases intrinsic motivation, and encourages personal initiative beyond self-interest (Dezsö & Ross, 2012, p. 1077). These findings are supported by the self-determination theory by Deci and Ryan (1987, p. 1024), revealing that intrinsic motivation is positively linked to better conceptual learning and creativity. Female empowering leadership promotes autonomy, engages others’ self-concepts, and “encourages ‘outside-the-box’ thinking” (Wu et al., 2021, p. 2), contributing to the generation of ideas (Dezsö & Ross, 2012, p. 1077). As the working climate is a crucial factor governing firm innovation success, female collaborative management is more effective in solving communication difficulties and conflicts that can easily arise in mixed-gender teams (Dai et al., 2019, p. 512). A more significant number of women can thus contribute to better integration of perspectives and legitimize an open, interactive, and inclusive leadership. Coupled with female relational information processing, firms create an environment where employees can freely express themselves and share task-related information and ideas (Dai et al., 2019, p. 511). Gender diversity, especially when a woman joins an all-male team, improves individual and group performance, leading directly to better firm performance (Dezsö & Ross, 2012, p. 1075). However, innovation success requires negotiations among multiple stakeholders to accumulate information and build cooperation. To effectively manage the innovation process, leaders should not attempt to dominate or control but instead collaborate and integrate knowledge. In addition to relational information processing, the cooperative managerial style enables women to fulfill these tasks (Dai et al., 2019, p. 509). Moreover, a complementary effect of varying female and male leadership tendencies can be beneficial so that the command-and-control approach, typically attributed to men, complements the participatory approach of women entrepreneurs. Firms focusing on gender diversity, i.e., women’s cooperation with their male counterparts, thus create synergies in improving innovation performance (Dai et al., 2019, p. 520). S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-19161904 2.1.2. Indirect Effects of Female Board Representation on Firm Innovation Furthermore, indirect effects play a considerable role in the influence of gender diversity on firm innovation performance, as gender diversity impacts the functional diversity of teams and the corporate culture due to greater female employee presence. Functional team diversity refers to teams with a variety of expertise or specialization. Organizational diversity studies argue that differing functional backgrounds amplify the knowledge base and promote a diverse domain-specific pool of task-related skills and abilities. This is useful in dealing with non-routine issues, such as innovation activities, and hence, induces the innovation process (Van Knippenberg & Schippers, 2007, p. 518). Consistent with these findings, the study of Simons and Rowland (2011, p. 174) reveals that the functional diversity of both project teams and top managers positively affects the outcomes of the innovation process. Focusing mainly on functional diversity at the group level, their study supports the potential for its moderating role between gender diversity and firm innovation. A subsequent study by Dai et al. (2019, pp. 519–520) confirmed this relationship by conducting simple slope tests with two subsamples of firms with high and low gender diversity. Although the slope for both subsamples is positive, it is steeper for high than low gender diversity. Hence, the observed difference provides evidence not only for the effect of gender diversity on functional diversity but also for the moderating role of functional diversity on the relationship between gender diversity and innovation outcomes. This is compatible with the argument that women may help coordinate and integrate perspectives from different functional backgrounds. Hence, the study results indicate that gender diversity enables the innovation potential of other diversity types, such as functional diversity (Dai et al., 2019, p. 508). Further, increased gender diversity in companies has an impact on corporate culture, representing “a system of shared values [...]and norms that define appropriate attitudes and behaviors for organizational members” (O’Reilly & Chatman, 1996, p. 160). A more equal female representation at the top of a firm’s hierarchical structure signalizes not only to a firm’s employees but also to stakeholders external to the firm that women are treated equally in the firm (Connelly et al., 2011, p. 40). Hence, gender diversity tends to reduce the impact of societal role expectations on women, partially relieving female employees of the pressure these expectations impose on them (Dai et al., 2019, p. 512). This applies especially to gender-diverse firms in male-dominated industries and patriarchal societies, where the increase in female corporate representation helps improve women entrepreneurs’ situation (Godwin et al., 2006, p. 626). By reducing the pressure on female employees, women are encouraged to interact more frequently with male employees and to communicate their perspectives, potentially differing from those of their male colleagues. This reinforces the positive influence of the relational information processing style, attributed to women, on synthesizing knowledge (Dai et al., 2019, p. 512). As gender is an observable characteristic, gender diversity can be easily identified on a superficial level. This means that also surface-level diversity can induce the expectation that differing points of view are existent and therefore encourages to openly express divergent perspectives among the male majority, even if superficial gender diversity is, in fact, not necessarily associated with informational diversity (Phillips et al., 2009, p. 347). Consequently, even the presence of women with congruent information may contribute to a broader elaboration of alternatives, impacting corporate culture and improving decision-making (Dezsö & Ross, 2012, p. 1075). A more far-reaching effect is that the greater female presence at the board level promotes an openminded corporate culture, which is expected to accept differing ideas, not necessarily only those of women. It follows that companies with a high level of gender diversity can encourage the expression of divergent opinions by every member (Dai et al., 2019, p. 512). In addition to informational and social diversity benefits, greater female participation at the top management level or boardrooms motivates women in middle management (Dezsö & Ross, 2012, p. 1073). This is because, despite the barriers to female advancement that may exist in society, a gender-diverse boardroom signalizes that the firm is committed to implementing equal opportunity. A firm positions itself as a women-friendly firm, increasing women’s organizational commitment, notably in lowerlevel managerial positions (Dezsö & Ross, 2012, p. 1076). It can be concluded that gender diversity enhances the firm’s ability to activate functional backgrounds and stimulates the innovation potential of female employees. The latter is because board gender diversity fosters an innovative corporate culture and increases diversity among inventors and entrepreneurs, which is conducive to firm innovation (Griffin et al., 2021, p. 125). 2.1.3. The Diversity-Innovation Paradox The stated arguments result in the diversity-innovation paradox. Research on applied social psychology has noted a discrepancy between the societal quest for diversity and peoples’ individual preference to be surrounded by like-minded others (Hackett & Hogg, 2014, p. 415). Accordingly, diversity, including gender diversity, is also an ambiguous strategic approach in the corporate context. On the one hand, diversity can be considered a source of creativity and innovation, whereas on the other side a source of suspicion, misunderstanding, and conflict (Bassett-Jones, 2005, p. 169). Firms that foster innovation and seek a competitive advantage, therefore, face a paradoxical situation. On the one side, advocates of the social identity theory argue that heterogeneity among teams harms cohesiveness, reduces communication, and leads to the forming of separate groups (for example, Ibarra, 1993, p. 61; Tajfel, 1974, pp. 69–70; Kanter, 1977, p. 49). This means that diversity, also induced by gender diversity, can potentially negatively impact group cohesion and its performance (Christian et al., 2006, p. 460; Milliken and Martins, 1996, pp. 407–408). S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-1916 1905 Moreover, the potential of varying points of view of diversified teams leads to increased conflicts (Knight et al., 1999, p. 447) and, therefore, to a slower decision-making process (Hambrick et al., 1996, p. 679). Diversity as a source of suspicion, misunderstanding, and conflict can thus result in poor quality, lack of customer focus and market orientation, and loss of competitiveness (Bassett-Jones, 2005, p. 169). Contrary, proponents of diversity argue that social cohesion makes teams vulnerable to groupthink so that team homogeneity can restrict the generation and assessment of alternative approaches (for example, Iles and Hayers, 1997, p. 98; Cox and Blake, 1991, p. 51), which leads to inferior decision-making and can be harmful to innovation activities (Hambrick & Mason, 1984, p. 202). Hence, diversity improves creative problem-solving capability when effectively managed, as diverse perspectives generate a greater variety of alternatives (Bassett-Jones, 2005, p. 172). This is why affective discomfort induced by potential conflict does not necessarily lead to inferior performance (Phillips et al., 2009, pp. 337–338). Indeed, some level of dissent amounts to a comprehensive elaboration and critical assessment of alternative opinions (Van Knippenberg et al., 2004, p. 1011), improving decision-making in gender-diverse teams and top management teams’ strategic capacity to act (Brahma et al., 2020, p. 5707). Moreover, women’s cognitive ability and inclusive leadership style proactively promote a collaborative climate, preventing emotional conflicts and their escalation (Dai et al., 2019, p. 511). A well-managed approach towards diversity thus impedes group thinking as it enhances creativity as a precondition for innovation, leading to increased commitment and job satisfaction (Bassett-Jones, 2005, p. 171). In this context, Griffin et al. (2021) investigated how board gender diversity influences firm innovation activities, using a database of firm-level patents of 12,244 firms and board characteristics across 45 countries. It follows that board gender diversity enables more exploratory and novel innovation and is associated with higher innovative efficiency. However, they also identified a time lag so that an improvement in innovation performance only follows an increase in gender diversity on corporate boards after two or more years (Griffin et al., 2021, p. 125). Despite potential conflicts, the benefits of gender diversity outweigh the costs as a result of the non-routine nature of challenges confronting corporate boards (Dezsö & Ross, 2012, p. 1075). However, diversity is only apt to foster firm innovation when effectively managed (Bassett-Jones, 2005, p. 173). This emphasizes the need for diversity management. Research by Østergaard et al. (2011, pp. 13–14) identified gender diversity as one of the variables with the most significant influence on a firm’s likelihood to innovate and advocate for a moderate degree of diversity, where women as a minority group have a critical mass to contribute to the innovation process. The likelihood of introducing innovation is thus 68 percent higher in groups composed of 60 to 70 percent of the same gender compared to the group dominated by one gender (Østergaard et al., 2011, p. 12). Against this backdrop, Kanter (1977) proposed the critical mass theory and coined the term of tokenism. Women as minority groups on the corporate level are often viewed through sex-role stereotypes by the majority group, hindering their advancement. This leads to gender-segregated jobs where women focus on secretarial tasks (Kanter, 1977, p. 28) are relegated to “the ‘emotional’ end of management” (Kanter, 1977, p. 25). It follows that women, when compromising only a marginal fraction of a team or a firm, are viewed as tokens and therefore treated as female representatives rather than as individuals (Kanter, 1977, pp. 214–215), which refers to the effect of tokenism (Kanter, 1977, pp. 207–208). She, therefore, argued that the presence of two or more women in the boardroom attenuates this effect (Kanter, 1977, pp. 237–238). Research on sociology and organizational behavior has further analyzed the critical mass. In this context, Konrad et al. (2008, p. 154) have stated that the positive effect of gender diversity is even more greater when three or more females are appointed to the boardroom compared to lower levels so that women’s presence in the boardroom is normalized beyond tokenism. These findings are consistent with further research confirming the critical mass of three or more women on corporate boards (Joecks et al., 2013, p. 61; Torchia et al., 2011, p. 299). However, Torchia et al. (2011, p. 300) stated that the contribution of the critical mass of female directors to the level of firm innovation is mediated by board strategic tasks, i.e., the degree to which board members are involved in the “initiation and implementation phases of the strategic process” (Torchia et al., 2011, p. 305). In principle, most studies reported three as a magic number that may change the dynamics in corporate boards and is conducive to innovation activities. Despite the importance of a greater female presence, it does not imply any superiority of either women or men over their counterparts (Dai et al., 2019, p. 520). 2.2. Contextual Factors of Firm Innovation Researchers highlight that these direct and indirect effects depend on contextual factors, which affect innovation and moderate the impact of gender diversity on firm innovation. A company’s organizational context, particularly the degree of innovation orientation, represents a critical contextual factor. Dezsö and Ross (2012, p. 1078) assessed the impact of female representation in top management on firm performance, using panel data of firms that belong to the Standard & Poor’s 1,500 index. Their findings showed that female participation improves firm performance only to the extent that a firm is to some degree focused on innovation, i.e., innovation intensity positively influences the effect of female presence on firm performance (Dezsö & Ross, 2012, p. 1084). The more the corporation strategically focuses on tasks requiring innovative solutions, the more valuable gender diversity is. Additionally, this relationship can be transferred to lower hierarchical levels, i.e., the more women in lower-level managerial positions are entrusted with innovation-related tasks, the stronger the impact of females at top management levels or boardrooms for motivation of these women (Dezsö & Ross, 2012, p. 1077). In this respect, Dezsö and Ross S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-19161906 (2012) contrasted their findings with those of firms that are less strategically focused on innovation. If innovation only plays a minor role in strategic orientation, the functions of top management are accordingly highly routinized. In the case of standardized routine tasks, a lengthy elaboration of alternatives can be counterproductive and offset the benefits of gender diversity (Dezsö & Ross, 2012, pp. 1085–1086). Therefore, homogenous groups perform slightly better on simple tasks than heterogeneous teams (Hambrick & Mason, 1984, p. 202). Gender diversity in administration teams with highly standardized procedures is hence expected even to weaken a firm’s performance (Alshirah et al., 2022, p. 4). This explains that studies drawing on performance measures other than innovation, such as productivity growth and effectiveness, find no significant relationship between gender diversity and firm performance, as these measures are not necessarily related with innovation (Østergaard et al., 2011, pp. 13–14). Further, previous studies have found that board size harms firm performance, as a larger supervisory board ensures better supervision of executives, but agency costs outweigh this advantage due to communication and coordination difficulties (Cao et al., 2021, p. 2). However, financial performance, as often measured by return on equity and leverage ratio, are found to benefit innovation, as better performing firms tend to have more financial resources to conduct research and development (Balsmeier et al., 2014, p. 1804). In addition to the organizational context, Dai et al. (2019, pp. 520–521) noted that the impact of gender diversity also depends on external factors, such as the industrial environment. Using data from male-dominated environments, their study has revealed that gender diversity positively influences innovation performance. This is because, given the premise of a male-dominated industry, such as high-technology industries, women’s different cognitive approaches are seen as a valuable source of knowledge, as they tend to provide unique insights into key tasks, thereby diversifying the knowledge base and allowing for more advanced knowledge synthesis (Dai et al., 2019, p. 521). This is supported by previous research supporting that factors external to female entrepreneurs, such as the social structure of an industry, are partially causal to the positive impact of gender diversity on corporate innovation (Godwin et al., 2006, p. 636). The institutional context in which a company operates is another contextual factor. According to institutional theory, organizations are determined to a large extent by an interplay of societal components of the institutional environment, such as political, social, and legal requirements (for example, Scott, 2001, p. 75; North, 1990, p. 3). These requirements also refer to an organization’s corporate governance systems. On average, female board representation is greater in countries with mandated or voluntary board quotas (BoardEx, 2022, p. 13). Furthermore, in countries with a two-tier system, as shared in many European countries, women directors’ power is greater if they are represented as both shareholder and employee representatives, further strengthening the link between female board members and firm innovation (Joecks et al., 2023, p. 1209). By focusing on conforming to institutional expectations and societal norms, institutional pressures can shape organizational behaviors and structures (Scott, 2001, pp. 22–23), including processes effectiveness, also innovation-related processes (Yamak et al., 2014, p. 90). This influences the extent to which firms can engage in internal and external knowledge generation and how knowledge gained can be captured for innovation (Torres de Oliveira et al., 2022, p. 1405). Companies thus consider engaging in lobbyism as “one of the most frequent tools used for [...] influencing governments” (Yamak et al., 2014, p. 97). Ultimately, firm innovation is shaped by the cultural context. Firstly, Griffin et al. (2021, pp. 137–138) referred to the relevance of culture by stating that the probability of female board members is higher in less masculine cultures with narrower gender gaps and higher female participation in the labor market. To understand cultural differences, it is crucial to introduce the concept by Hofstede (2001, p. 29), in which the social psychologist originally proposed four cultural dimensions: individualism, power distance, uncertainty avoidance, and masculinity. Although Hofstede’s cultural dimensions were derived from a sample of IBM employees in the 1960s and 1970s (Hofstede, 2001, pp. 41–42), he identified tendencies prevalent within each culture and laid the foundation for further research. Gender differences in subsequent studies thus mainly relate to different manifestations of Hofstede’s masculinity dimension, later considered as an attitude towards gender equality (Hofstede et al., 2017, p. 58). On this basis, a study by Schwartz and Rubel-Lifschitz (2009, p. 171) across 68 countries revealed gender differences in preference for achievement. While females attach more importance to the community and values, such as benevolence and harmony, males tend to place more value on self-direction, power, and individual success. Although these findings were not directly related to the prediction of corporate decision-making, they imply that these genderbased value differences influence female directors’ decisions. Research by Griffin et al. (2021, p. 128) revealed that women in an advisory capacity may avoid unprofitable investments driven by an overemphasis on achievement and instead pursue more exploratory innovation projects in the prospect of long-term benefits. Women tend to demand a higher payoff and likelihood of success in agreeing to investment projects, thereby promoting more efficient innovation. Despite this cross-national finding, Schwartz and Rubel-Lifschitz (2009, p. 180), however, stated that these gender-based value differences were more prominent in countries with greater gender equality, which is typically associated with feminine culture (Hofstede et al., 2017, p. 145). How gender diversity affects firm innovation is hence moderated by the attitude towards gender equality imposed by the prevalent culture. As summarized in Figure 1, the situation a strategic decision-maker faces is complex and made up of far more phenomena than can possibly be comprehended. The effect of board gender diversity is determined by the interplay of direct and indirect effects and shaped by contextual factors. No form of gender diversity can be universally applied to S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-1916 1907 Figure 1: Effects of Female Board Representation on Firm Innovation (Source: Own Illustration) other firms subject to different contexts, affecting innovation and moderating the impact of board gender diversity on firm innovation. When analyzing the relationship, it is essential to understand the concept as a situational approach, which needs to be evaluated contextually. Despite sustained and widespread research, academic literature to date predominantly focused on examining single countries and sought to understand dynamics within national boards that explain female board presence and their impact on firm innovation. Although most empirical studies point to a positive link, researchers are not in agreement about the extent to which board gender diversity contributes to firm innovation. One level of analysis that has received comparatively little scholarly attention in this debate is the international level. Aside from a few notable exceptions (for example, Griffin et al., 2021), comparative cross-national research designed to reveal national-level differences in the effect of female board representation on firm innovation remains scarce. It is this gap this study begins to address. The research presented in this paper thus seeks to address this void by first studying the relationship separately on a national level in Germany and France and subsequently comparing results to identify potential underlying components for differing results among countries. This will contribute a cross-country consideration to the existing perspectives and enhance the understanding of direct and indirect effects and contextual factors that impact the link between women directors and firm innovation. 3. Theoretical Framework: Impact of Women on Corporate Boards on Firm Innovation When analyzing the impact of women on supervisory boards on firm innovation, Hambrick and Mason’s (1984) upper echelons theory can be understood as guiding literature. According to neoclassical economic theory, top managers and executives have until then been viewed as homogeneous and rational optimizers who can exert minimal influence on company outcomes or decisions (Weintraub, 1985, p. 26). In contrast, the upper echelons theory describes the idea that upper echelons, i.e., top level leadership including boards, view their situation through their own highly personalized lenses. This is due to differences in their experiences, values, personalities, and other human factors. Hambrick and Mason (1984, p. 198) thus stated that organizational outcomes are determined to some extent by managerial characteristics consisting of psychological traits, such as values and the cognitive base, and observable characteristics, such as age, socioeconomic roots, and education, among other things. Even though gender is not explicitly mentioned as part of the S. L. Nussbaum /Junior Management Science 9(4) (2024) 1901-19161908 managerial characteristics, research from psychology (e.g., Silverman, 2003, p. 451) and management (e.g., Croson and Gneezy, 2009, p. 1) has shown gender differences in values and cognitive base, so gender is implicit in the psychological characteristics. Since introducing the upper echelons theory, a stream of studies has emerged showing that leaders’ personal characteristics are critical determinants of organizational decisionmaking and outcomes. Accordingly, after more than 35 years, this management theory is considered “one of the most influential perspectives in management research” (Neely Jr. et al., 2020, p. 1029). Their theoretical framework laid a critical foundation for the discussion of board gender diversity by describing organizations “as a reflection of its top managers” (Hambrick & Mason, 1984, p. 193). This implies that leaders’ psychological characteristics, which differ among genders, enter into strategic choices by affecting managerial perceptions so that information is selectively chosen for processing and “interpreted through a filter woven by one’s cognitive base and values” (Hambrick & Mason, 1984, p. 195). This notably applies to strategic decisions, characterized by a substantial behavioral component, such as innovation-related decisions, as opposed to operational choices, such as inventory decisions and credit policy, which are more amenable to a calculable solution (Hambrick & Mason, 1984, p. 195). In the context of innovation and the exploration of alternatives and new ideas at every stage of the process, it is essential for management and corporate boards to deliberate and for the board members to act as a source of external perspective, providing thoughtful and timely feedback on strategic orientations (Griffin et al., 2021, p. 126). Since women are cognitively different from their male counterparts, women’s presence enriches board discussions. In this context, women’s relational information processing allows for more precise knowledge integration among divergent opinions and, thus, the realization of synergies of genderdiverse boards and the exploitation of their potential, leading to better strategic decisions. This is why women directors focus more on business strategies that improve performance outcomes in the long-term than short-term results, creating a more failure-tolerant and, thus, more innovative culture in a gender-diverse board (Joecks et al., 2023, p. 1206). This is reflected in women’s leadership style shaped by cooperation, coalition building, and collaboration, referred to as the “feminine model of leadership” (Klenke, 1993, p. 334). Hence, the paper ultimately hypothesizes that the female transformational leadership style is an underlying mechanism through which female directors positively influence supervisory board decisions so that board gender diversity is conducive to “innovative corporate culture”, as suggested by Griffin et al. (2021, p. 148). For these reasons, the link between female board representation and firm innovation is expected to be positive, leading to the following hypothesis: Hypothesis: The higher the proportion of women in corporate boards in a given firm, the higher the firm’s innovation performance. 4. Cross-Country Empirical Analysis Before testing the relationships between female directors and firm innovation in French firms in Section 4.1.3 and in German firms in Section 4.2.3, an explanation for the country selection is provided. In this context, Table 1shows the percentage proportion of board seats occupied by women in the most recent year for various European countries and internationally. With a proportion of 44 percent of women on corporate boards, France is the country with the highest proportion of female board members and was selected for the analysis to investigate whether French firms are correspondingly more innovative. A recent study on German firms by Joecks et al. (2023) is suitable for contrasting the result because Germany represents the midfield in a European and international comparison with a proportion of 31 percent of women directors. Further, the corporate government system of both countries, Germany and France, is characterized by a two-tier board structure including an executive board and a supervisory board (Joecks et al., 2023, p. 1204), which allows for comparability of results. Focusing on a single country at a time also has the advantage that the sampled firms are subject to the same national innovation system and macroeconomic environment. 4.1. Descriptive Analysis of the Impact of Women on Corporate Boards on Innovation in French Firms 4.1.1. Sample and Variables The initial sample consists of all 120 companies listed on one of the French exchange stock markets, such as CAC40, CAC Next 20, or CAC Mid 60, which together form the SBF 120 index. Data was collected on a one-year period for 2022 to use the most recent available data for the analysis. However, due to missing values for the proxy of firm innovation performance, the initial sample had to be reduced, so the final data set consists of 60 companies, all listed on the index SBF 120, on December 31st, 2022. Firm innovation as the dependent variable, and thus the primary variable of interest, is measured by the number of patents granted to the sampled firm in 2022. Despite various proxy variables for innovation, patent count is a generally accepted indicator among researchers. Focusing on patents as an outcome-based measure of firm innovation, the model follows the recent claim by scholars (for example, Joecks et al., 2023, p. 1207; Griffin et al., 2021, pp. 124–125) who argued that output-based innovation variables are more precise than input-based innovation measures, such as the expenditures on research and development (R&D). This is because patents are more closely related to firm innovation strategy and thus likely to be affected by the corporate board. 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