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 Classification: G3, M1, O3 |
Keywords: corporate governance rating, innovations, board effectiveness, board commitment and vigilance, board compensations |