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The effect of indirect board connections on R&D investment: Evidence from China

Tracks
Crystal 1
Monday, July 1, 2024
8:45 AM - 9:00 AM

Presenter

Dr Natalie Elms
Senior Lecturer
Queensland University of Technology

The effect of indirect board connections on R&D investment: Evidence from China

Abstract

This study examines the effects of indirect board connectedness on research and development (R&D) investment decisions in China. Using hand-collected data, we measure indirect connectedness through three social network measures: degree centrality, closeness centrality, and betweenness centrality. We find that betweenness centrality is significantly, negatively, and robustly related to R&D intensity. Moreover, the effects of degree centrality and closeness centrality on R&D intensity are highly dependent on the firms board meeting frequency, which acts as an internal information transmission to weaken the informational role played by indirect board connections. Meanwhile, firms with low levels of opaqueness strengthen betweenness centralitys negative effects on R&D intensity, suggesting that unobstructed information transfer strengthens board connectedness effects on R&D intensity. In contrast to existing studies that have focused on direct board ties and found positive informational effects on R&D investment, our results suggest directors indirect ties built upon third parties make less intensive R&D investment due to innovation-related information leakage.

Biography


Chair

Sammy Ying
Senior Lecturer
The University of Newcastle

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