Innovation under the microscope: the financial benefits of board-level R&D oversight

Purpose This study aims to examine whether, and under what conditions, board-level R&D committees improve firm valuation. Drawing on the attention-based view (ABV), the authors argue that these committees function as an attention architecture that channels innovation issues onto the board agenda and conditions the payoff to R&D spending. Design/methodology/approach Using a balanced panel of 500 S&P 1500 firms (2010–2018), the authors hand-code R&D-focused committees from BoardEx and public filings and measure firm performance with Tobin’s Q. The authors estimate two-step system generalized method of moments models that address endogeneity and performance dynamics, treating R&D intensity and committee interactions as endogenous and including a lagged dependent variable. Findings When performance dynamics are accounted for, the authors do not find a stand-alone valuation premium to simply having an R&D committee. The valuation impact of an R&D committee is stronger when R&D intensity is high and negligible when intensity is low, consistent with ABV’s view that structural attention amplifies situational salience. Board attributes also moderate the committee-performance relationship: higher average director age and longer average director tenure weaken it, while greater outside board ties strengthen it in models without performance dynamics, though this last effect attenuates once a lagged Tobin’s Q is included in the model. Originality/value The study extends ABV to the boardroom by showing that optional committees operate as formal attention structures that translate heavy, uncertain R&D outlays into market value when paired with salient spending. It also specifies boundary conditions (director age, director tenure and external board ties) that qualify common assumptions about board experience. Practically, the results suggest that firms making substantial innovation bets should pair R&D spending with a committee that has a clear oversight charter, disciplined reporting routines and the cognitive bandwidth to process technical material, offering actionable guidance to directors, executives and investors.