The moderating role of board diversity on the relationship between ESG performance and technological innovation capabilities of European firms

Purpose This study aims to examine the relationship between environmental, social, and governance (ESG) commitment and technological innovation capabilities (TIC), with a focus on the moderating effect of gender diversity on corporate boards. It seeks to uncover whether ESG practices serve as strategic resources for innovation and how board diversity influences this dynamic. Design/methodology/approach A quantitative approach is employed using panel data from 3,048 listed firms across Germany, France, Italy, Spain, and Finland over the period 2019–2023. The study uses regression analysis to evaluate the relationship between ESG performance and TIC, incorporating gender diversity on boards as a moderating variable. The resource-based view (RBV) provides the theoretical lens for understanding ESG as a source of innovation-enhancing resources. Findings Results show a positive relationship between ESG commitment and TIC, affirming the strategic role of ESG practices in driving innovation. However, gender diversity on boards negatively moderates this relationship. This suggests that while ESG fosters innovation, board gender diversity may not always enhance this process, possibly due to integration challenges or tokenism. The findings call for a more nuanced approach to managing board diversity to realize innovation benefits fully. Practical implications The study highlights the complex interplay between board diversity, ESG efforts, and innovation outcomes. It emphasizes the need for inclusive corporate cultures that go beyond symbolic diversity. By recognizing gender diversity as more than a numerical representation, firms can better harness diverse viewpoints for innovation. The research also stresses the importance of ESG responsiveness to meet stakeholder expectations and contribute to sustainable development goals. Originality/value This research contributes to the limited empirical literature linking ESG commitment to technological innovation and introduces board gender diversity as a critical but complex moderator. It challenges assumptions about the universal benefits of diversity, providing new insights for both scholars and practitioners. The findings advance the RBV by framing ESG as a strategic asset and offer practical recommendations for firms aiming to align governance, innovation, and sustainability.