Do women board members make a company more innovative or risk averse? The answer is both, according to our recent study. It all depends on how the company performs relative to its goals.
Professors Małgorzata Smulowitz, Didier Cossin and I examined 524 S&P 1500 companies from 1999 to 2016, measuring innovation through patent activity. Patents reflect both creative output and risk-taking. They require significant investment in novel ideas that might fail, disclosure of proprietary information and substantial legal costs. In short, patents represent genuine bets on the future.
Our findings revealed a striking pattern. When companies performed poorly in relation to their goals, they produced fewer patents after more women joined their boards.
However, companies exceeding their performance targets saw increased patent output as their number of women directors grew. Similarly, when companies were financially flush, there were more patents generated when their boards had more women.
The situation changed when we examined radical innovations, those patents in the top 10% of citations. For these high-risk, high-reward innovations, the risk-averse effect of women board members dominated.
When a company’s performance fell below aspirations, there were fewer radical innovations as its board gained female members. We found no corresponding increase in radical innovations when performance exceeded goals.
One finding surprised us. We predicted that boards with more women would reduce innovation when companies approached bankruptcy. Instead, it was the opposite: Boards with more women actually increased patent output as bankruptcy loomed. This suggests that women directors may fight harder for a company’s survival through innovation when facing existential threats.
Why it matters
Between 2000 and 2024, the number of women on S&P 500 boards increased from 27% to 34%. But previous research has painted conflicting pictures on the effect that women board members may have. Some studies showed that women reduce corporate risk-taking, while others demonstrated they increase innovation and creativity. Our work suggests both perspectives are correct under different circumstances.
For companies and regulators pushing for greater board gender diversity, this research provides practical guidance. Companies performing well can expect increased innovation by adding women to their boards. These directors can bring diverse perspectives, improved decision-making and better resource allocation that translate into more patents.
Conversely, poorly performing companies can expect boards with more women to focus on stability over risky innovation. This isn’t necessarily negative.
Research shows that banks led by women were less likely to fail during the financial crisis, and companies with more women directors experience less financial distress. Reduced innovation during tough times may reflect prudent risk management rather than risk aversion.
Traditional theories predict that poor performance triggers risky searches for solutions. But boards with more women appear to prioritize organizational survival over uncertain innovation when performance suffers. They may assess that failed innovation attempts could worsen an already precarious situation.
This research also speaks to the “glass cliff” phenomenon, where women often join boards during crisis periods. Our findings suggest these directors may bring exactly what struggling companies need: careful risk assessment and focus on survival rather than potentially wasteful innovation spending.
What still isn’t known
We measured innovation through patents, but many innovations never become patents. How women directors affect other forms of innovation – such as copyrights, trade secrets and first-mover advantage – remains unclear.
What are the mechanisms driving the differences? Do women directors actively advocate for different innovation strategies? Do they change board discussion dynamics? Do they influence CEO and management team decisions indirectly? Future research needs to open the “black box” of boardroom decision-making.
Finally, the long-term consequences need examination. We measured patent output, but not whether the patents translated into commercial success or competitive advantage. Understanding whether the innovation patterns we documented ultimately benefit company performance would provide crucial insights for decision-makers.
The Research Brief is a short take on interesting academic work.