The effect of board capital diversity on innovation performance: evidence from new product announcements

Purpose Drawing on the board capital perspective, this study examines how two distinct board resources – knowledge diversity embedded in directors' functional expertise and information diversity derived from their external industry ties – affect market reactions to new product introduction (NPI) announcements, and whether these effects vary with product newness and firm size. Design/methodology/approach Using an event-study methodology, this study analyzes 395 NPI announcements by US-listed high-tech firms. Innovation performance is measured through cumulative abnormal returns (CAR) surrounding announcement dates. Board knowledge diversity is operationalized using Blau's index based on directors' functional backgrounds, while board information diversity is captured through industry embeddedness derived from directors' external board ties. Cross-sectional regression analyses test direct and moderating effects, incorporating product newness and firm size as contextual moderators. Findings Board knowledge diversity is positively and significantly associated with market reactions to NPI announcements, with stronger effects for highly novel products and smaller firms. By contrast, board information diversity is negatively associated with market reactions to NPI announcements, but the association is statistically insignificant. The results are robust across alternative model specifications and measurement approaches, suggesting that internally embedded expertise plays a more critical role than external network ties in innovation governance. Originality/value Moving beyond composite diversity measures, this study distinguishes the innovation-governance roles of directors' human and social capital. It further advances the literature by assessing the market-perceived value of specific NPIs and identifying product newness and firm size as boundary conditions shaping the contribution of board capital to innovation governance.