Influence of Gender Diversity in Boards on Family and Non-family Businesses: Towards Innovation and Creativity

From FIIB Business Review

The innovation and creative strategies implemented by companies have numerous impacts and are demonstrated. The ownership structure is central to corporate governance, to the degree that it decides in whose hands it keeps the company. The ownership structure also influences the composition and autonomy of the board of directors. This study of the ownership structure reveals the importance of family members in many corporations as major shareholders. Family companies are now very popular and are increasingly important in the typology of enterprises worldwide.

As the economy changes, women become an increasingly important part of corporate governance, and the proportion of women managers also increases on managing boards. Many of the countries that adopted gender-based initiatives, including Norway, Spain and India, and other European countries, now require more than 40% of the number of women managers to be compulsory. With the annual rise in the percentage of women on boards of directors, women directors have greater opportunities to engage in the decision-making processes.

In the business context, innovation, as a key motor of business success, survival, and sustainability, is especially relevant in relation to traditional jobs. Enterprises should take advantage of fresh and unique concepts and new approaches arising from the creative process to address everyday business and strategic challenges effectively, find new business growth opportunities, and enhance creativity by launching new products or services. Creativity, therefore, can vary from the success and failure of an entrepreneur.

Creativity has become more and more important for informal women microentrepreneurs who have important performance and surface challenges with other entrepreneurs. Consequently, despite the high percentage of family-controlled firms, prior research on family–enterprise relationships and innovation and creativity did not achieve a strong consensus. Experiments have shown the inverse relationship between families that are already at risk and research and development—R&D. On the contrary, the creative emphasis of family companies and the positive effect on company growth have already been studied.

Moreover, there is a dearth of literature on family companies and the influence that certain characteristics or compositions may have on innovation and creativity. Previous research, however, has not reached a consensus either on the influence of these women on strategic decisions or on the performance of the company. The top management team has an important influence on decisions and results of the business, and the feminist theory suggests that women are typically more concerned about moral and ethical standards. Since the attributes, concentration, and actions of women vary dramatically from the men, women’s presence on the board would influence business and business behaviour. As directors, they would concentrate more attention on the needs of stakeholders, such as demands for compensation for workers, health and safety, environmental security, and the reputation of the company in the eyes of stakeholders.

Consequently, the proportion of women on the management board will affect the innovation and creativity of the organization because of the relationship between women directors. It is also the case in family companies, as some authors have argued, that the influence of women on family boards is positive for the strategic controls they exercise, which, in turn, could be positive for innovation and creativity, while others point out some opposite arguments about less risky strategies that women frequently adopt. The involvement of non-family members in the family firm yields both benefits and challenges. Often, family firm studies focus on issues related to family members, neglecting the influence of non-family members.

This study considers non-family women employees by examining their cognitive effect when it comes to innovation and creativity, along with family employees, to offer a more encompassing perspective of family firm innovation. This study seeks to contribute to inconclusive research by analysing the role of women directors in influencing the innovations and creativity of family and non-family women directors. Additionally, the results will allow researchers and practitioners to have a clearer idea of the impact that women on boards can have on innovation and creativity, considering the different innovation and creativity components and the case of family companies, as well as the familiar links of women appointed to the board in India.

Article details
Influence of Gender Diversity in Boards on Family and Non-family Businesses Towards Innovation and Creativity
Hitesh Shukla, Vibhu Teraiya
First Published January 12, 2022
Research Article
DOI: 10.1177/23197145211068603