Scientific Papers

JOURNAL OF INTERNATIONAL STUDIES


© CSR, 2008-2019
ISSN: 2306-3483 (Online), 2071-8330 (Print)

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The impact of corporate governance on firms' propensity to innovate - multidimensional and cross-country analysis

Vol. 17, No 3, 2024

 

Moh’d Alsqour

 

Irbid National University,

Jordan

dr.mohmmad@inu.edu.jo

ORCID 0000-0003-0167-3429


The impact of corporate governance on firms' propensity to innovate - multidimensional and cross-country analysis

Husam Ananzeh

 

Irbid National University,

Jordan

h.ananzeh@inu.edu.jo

ORCID 0000-0001-7274-1199


Arkadiusz Jurczuk

 

Bialystok University of Technology,

Poland

a.jurczuk@pb.edu.pl

ORCID 0000-0003-2994-8180


Paweł Kędziora

 

Kozminski University,

Poland

pkedziora@kozminski.edu.pl

ORCID 0009-0000-2943-1902

 

 

 

Abstract. The study examines the correlation between corporate governance ratings, a crucial element of the Environmental, Social, and Governance (ESG) index provided by Thomson Reuters, and companies' inclination towards innovation. Employing a cross-country analysis, the research explores how governance ratings influence corporate innovation decisions. The results reveal a positive association between corporate governance scores and the implementation of innovative practices. Notably, board effectiveness, commitment, vigilance, and compensation structure significantly impact firms' innovation levels. The study further demonstrates that the positive relationship between ESG ratings and innovation is particularly pronounced in companies with larger, more diverse boards, active audit committees, and well-structured compensation systems. This research enhances our understanding of how robust corporate governance frameworks can drive innovation by fostering transparency, accountability, and a positive work environment. Such governance structures mitigate risks, deter unethical behavior, and promote long-term corporate sustainability. Consequently, the study suggests that organizations should prioritize strong corporate governance practices to bolster their innovation capabilities. The findings underscore the pivotal role of corporate governance in shaping firms' innovative potential, contributing valuable insights to the intersection of governance and innovation in the corporate landscape.

 

Received: November, 2023

1st Revision: June, 2024

Accepted: September, 2024

 

DOI: 10.14254/2071-8330.2024/17-3/5

 

JEL ClassificationG3, M1, O3

Keywordscorporate governance rating, innovations, board effectiveness, board commitment and vigilance, board compensations