Responsible and green innovation

Do women promote environmental sustainability? A European patent analysis

Mariasole Bannò, Marco Traversi, Graziano Coller

Sustainable innovation can be defined as the development, renewal or improvement of new product processes, services and technologies that “contribute to the development and well-being of human needs and institutions while respecting natural resources and regeneration capacities” (Tello and Yoon, 2008, p. 165). Sustainable innovation leads to socially desirable outcomes (Voegtlin and Scherer, 2017) because it delivers enhanced environmental and social performances together with an improved economic performance: both in the short and long term sustainable innovation generates positive social and environmental impacts (Bos‐Brouwers, 2010).

In a recent literature review, Cillo et al. (2019) and Cardoni et al. (2020) point out the growing interest from researchers on the relationship between innovation and environmental goals. The fast growth rate in the number of published research on sustainable innovation, with more than half of the studies published in the last seven years, resulted in a highly fragmented body of knowledge: several studies explored the structures, resources, capabilities, and processes that can support environmental and social aims in innovation management (e.g., Chen et al., 2014; Du et al., 2013; Farla et al., 2012; Wernerfelt, 1995), however, very few studies investigated the relationship between female presence in Board of Director (BoD) and sustainable innovation.

According to Chen et al (2018) Board gender composition has gained substantial attention over the past decade in light of growing regulatory pressure on firms to address the underrepresentation of women in the boardroom. Many European countries enacted binding gender quotas (e.g. Norway, France, and Italy) while others just provided recommendations to encourage (without imposing) greater female board representation (e.g. UK and Spain) (Bannò and D’Allura, 2020). Parallel to and reinforcing these governance reform efforts is a growing body of research examining whether corporate outcomes can be influenced by more women on boards, and the critical insight from this literature is that gender differences in the boardroom matter (Fondas and Sassalos, 2000; Burgess and Tharenou, 2002; Nielsen and Huse, 2010; Vinnicombe, S. 2009). Boards of directors play a key role in organizational decision making regarding the business strategy; however, research has been inconclusive about the relationship between female involvement and environmental sustainability (Hyun et al., 2016; Isidro and Sobral, 2015; Liao et al., 2018).

This paper focuses on the role of women in the environmental sustainability innovation. We investigate such relationship with regard to gender diversity in the BoDs and the moderating role of the institutional context.

Our findings are relevant to business owners and managers with regard to firm’s innovation strategy. A deeper understanding of the relationship between gender diversity on the board and innovation may contribute to increasing the number of women in these important roles.

In terms of public policy important implications emerge. As both the presence of a critical mass and the presence of women in control positions helps in sustainable innovation, policy maker should implement specific actions to stimulate such virtuous relationship.

Firm’s ability to innovate is influenced by both internal (i.e.BoD composition) and external factors (i.e. institutional context) (Hambrick and Mason, 1984; del Río et al., 2016; Eagly, 1987).

As far as BoD composition is concerned, Chen et al (2018) show that greater female board representation is associated with greater innovative success, and thus enhances firm performance in innovation-intensive industries. Firms with female directors tend to invest more in innovation and obtain more patents and citations for given resarch and development expenditures. In the field of environmental sustainability innovation, Franceschelli et al. (2019) studied the influence of woman CEO on the board of directors on the performance of Italian recycling firms. He and Shup (2019) empirically investigated the relationship between board gender diversity and China firm’s green innovation and found that green innovation at the firm‐level is systematically related to female board representation (Williams, 2003). Specifically, they found that women can exert a sizable and positive effect on sustainable innovation, once they enjoy at least two seats on the boards, coherently with critical mass approach (Torchia et al., 2011). Further, extant literature suggests that, given the social barriers female face in the boardrooms, women minorities need to have other qualities to be influential such as individual power as CEO (Triana et al., 2014; Carli and Eagly, 2016; Fritz, and Knippenberg, 2017). Others argue that they should reach a critical mass, which the literature identifies as three members (Trchia et al., 2011; Bannò and Nicolardi, 2020).

Although the positive effect on innovation of a greater female presence on the board is almost unanimously recognized in the literature; the actual firm’s ability to exploit this potential highly depends on the critical mass and/or the female presence in power positions.

In summary, we expect that:

 

Hypotheses 1a: Having at the most one woman on the board of directors has no positive influence on a firm’s environmental innovation output.

Hypotheses 1b: Achieving a high degree of heterogeneity within the board of directors has positive influence on a firm’s environmental innovation output.

Hypotheses 1c: Having female president or vice president has positive influence on a firm’s environmental innovation output.

 

As far as the institutional context is concerned, innovation highly depends on the interplay between the external and internal environment (Dentchev et al., 2018; Sharma, S. 2000). In particular literature has emphasized that company’s ability to innovate is strongly influenced by its relational capital and the intangible value present in the relations (Halila, 2007). In particular Institutional Theory acknowledges the role of external forces in shaping organizational activities. These institutional actors impose coercive, normative, and mimetic pressures on firms (Delmas and Toffel, 2004). As argued by Darnall et al. (2008), institutional theory states that external factors will lead organizations to adopt similar structures, strategies, and processes, that is, to “organizational isomorphism”. In particular, managerial perceptions of institutional pressures are extremely important in influencing the adoption of environmental innovation (Del Río et al., 2015).

However, the analysis of the impact of external and internal factors has too often been carried out as if they were separated from each other, that is, implicitly assuming that institutional context influences sustainable innovation separately from other drivers, like female participation on BoD. We argue that the two phenomena are likely to interact to each other, finally influencing the development of environmental innovation. Organizations that implement environmental practices are often influenced by the institutional context. For this reason, we investigate the moderating effect between female presence and institutional context.

The social dynamics and the role of women in the entrepreneurial arena are strongly influenced by the institutional system in which the firm operates. Specifically, a culture more inclined towards the female figure in leadership roles can enhance the contribution made by women to those processes.

In summary, we expect that:

 

Hypotheses 2a: Having at the most one woman on the board of directors has no positive influence on a firm’s environmental innovation output. The higher the institutional quality of government of the country, the stronger will be this effect.

Hypotheses 2b: Achieving a high degree of heterogeneity within the board of directors has a positive influence on a firm’s environmental innovation output. The higher the institutional quality of government of the country, the stronger will be this effect.

Hypotheses 2c: Having female president or vice president has positive influence on a firm’s environmental innovation output. The higher the institutional quality of government of the country, the stronger will be this effect.

#board of directors #gender #innovation #Institutional Theory #Sustainability