The Influence Of Board Diversity And Innovation Strategy On The Growth Of Private Enterprises

As a main form of enterprise organization,private enterprise is the most active economic growth force in Chinese economy;therefore,its sustainable development plays a crucial role in the national economy.In the current competitive environment,the formulation or decision-making ability of strategy is the fundamental guarantee of enterprise's sustained and healthy growth,of which the key one is innovation strategy.As the decision-making body of strategy,board of directors determines the innovation input,way and performance,and then affects the private enterprise growth.However,because the innovation activities usually have great uncertainty,tedious process and complicated tasks,the board members must have various knowledge and experience,which can provide the information and resources needed to make innovation decisions.Board of directors composed of different pepole forms both vertical and horizontal diversity structures.In addition,based on the contingency theory,the enterprise is an open subsystem in the social system,the change of environment will make the innovation strategy change,only when the organization strategy matches external envronment and internal conditions,strategy can play its due role.Therefore,this paper studies how board diversity influences the growth of private enterprises through innovation strategy,and the impact of different contexts on the relationship between board diversity and innovation strategy.At present,the related researches have made great achievements,but board diversity morely focuses on demographic characteristics,ignoring the cognition characteristics and vertical attributes.Although some literatures break the traditional"structure-performance" paradigm and focus on the mediation role of board behavior,most of them focus on the linear relationship between them.Contingency studies in board governance are still scarce,and most of which use OLS method and ignore the fact that data is nested.Behavior studies and contingency studies are not integrated into a same system,the complete theoretical frame including context,board structure,behavior and corporate performance has not been established,which makes inconsistent with the enterprise practice.Based on the mechanism of board diversity-innovation strategy-private enterprise growth,this paper takes board diversity as independent variables,innovation strategy as mediator variable,company short-term and long-term growth as dependent variables,product market competition and regional economic development as moderator variables,chooses the panel data of private listed companies from 2011 to 2015,uses SPSS MEDCURVE and PROCESS macro files to respectively test the non-linear and linear mediation effect of innovation strategy between board diversity and company short-term and long-term growth,and uses HLM to test the moderation effect of contexts on the relationship between board diversity and innovation strategy.This study realizes the effective connection between regional level,or industry level and micro level of board governance;uses the paradigm of "structure-conduct-performance" and introduces the innovation strategy as a intervening variable,which makes the theoretical model and practical logic more consistent,theoretical research results more valuable;adoptes methods of,cross-level moderation" and "the nonlinear mediation",which enriches the empirical research method in board governance;can guide the private listed companies through building the reasonable board structure,formulating scientific innovation strategy to improve the organization's adaptability and promote the sustainable development ability.Through the empirical test,the main conclusions are as follows:First,the impact of board diversity through innovation strategy on private enterprise short-term and long-term growth is different.In the framework of board diversity-innovation strategy-short-term growth,board of directors can promote the innovation strategy by increasing directors' age diversity,education level,power inequality and reducing the status inequality;in the framework of board diversity-innovation strategy-long-term growth,board of directors can promote the innovation strategy by increasing directors' age diversity,average education,power inequality and reducing average age and function background diversity of the board.Second,there is a U-shaped relationship between the innovation strategy and short-term growth of private enterprises,and currently it is in the first half of curve.That indicates that there is a "threshold" for the improvement of sales,before the threshold is reached,the innovation investment will restrain the short-term growth due to the great risk,with the increase of innovation investment,the risk will be gradually reduced,the achievement will gradually appear and bring some benefits to the enterprise.In addition,combining with the empirical conclusions of board diversity,innovation strategy and the short-term growth,board age diversity,average education and power inequality are positively related to innovation strategy,status inequality is negatively related to innovation strategy,but the indirect effects of board age diversity,average education and power inequality on the short-term growth through innovation strategy are both negative,and status inequality has a positive effect on the short-term growth through innovation strategy,which indicate that the impact of innovation strategy on short-term growth is in the first half of the U-shaped curve in current innovation investment level,that is,the level of private listed companies is still low,which can not promote the corporate sales.Third,the innovation strategy is positively correlated with the long-term growth of private listed companies.In this paper,the ratio of R&D to sales is used as the proxy variable of innovation strategy,and the long-term growth is measured by the growth rate of enterprise value,the conlusion that there is a positive correlation between innovation strategy and long-term growth of private enterprises is found,therefore,as long as the enterprises continue to carry out innovation activities,the enterprise value will be continuously improved.Private listed companies can not be anxious for success,but should ensure sustained and adequate resources,treat technological innovation as a continuous cycle of process,and patiently wait for its role to enterprise growth.Fourth,the innovation strategy between board diversity and corporate short-term growth and long-term growth respectively exist the nonlinear and linear mediation effect.Board age diversity,average education level,power inequality and status inequality significantly influence the short-term growth through innovation strategy,because of the U-shaped relationship between innovation strategy and short-term growth,the mediation effect of innovation strategy is not a fixed constant,but changes with the value of board diversity,namely the mediation effect is nonlinear.The age diversity,average education,functional background diversity and power inequality have a significant impact on long-term growth through innovation strategy,as a result,private listed companies can promote the growth of corporate value by increasing board age diversity,average education,power inequality and reducing average age,and function backgrounds diversity.Fifth,the relationship between board diversity and innovation strategy in private enterprises is influenced by external contexts.Due to the data of private listed firms nested in their respective industry(or area),which means that data is at different levels,therefore,hierarchical linear model(HLM)is adopted to analyze the data.The study finds that,product market competition has a significant moderation effect on the board average education,profession background diversity,status inequality and innovation strategy,the more of product market competition,the greater effect of board average education,profession background diversity and status inequality on private enterprise innovation.The regional economic development has a significant moderation effect on the board age diversity,gender diversity,major background diversity and innovation strategy,the more developed region,the lager effect of board age diversity,gender diversity,and major background diversity on innovation strategy.Therefore,industry environment and regional environment influence the boundary of the board diversity on innovation strategy in private enterprises,which are very important contexts and can not be ignored.This research makes the following contributions:(1)Deepening the study of board diversity from the horizontal and vertical two dimensions.Based on the existing studies of the board horizontal diversity,the paper deeply excavates the role of power distribution and status difference in the individual level and the formal and informal hierarchies existing in the board team,which can better explain the impact of board diversity on corporate strategy and performance.(2)Using the nonlinear mediation method and finding the nonlinear intermediary effect of innovation strategy between board diversity and short-term growth of private enterprises.According to the practice of Zhao Lin and Xie Yongzhen's(2013),the SPSS21.0 MEDCURVE macro which is developed by Hayes and Preacher(2010)is used,the confidence intervals is gained through the implementation of bootstrap,so as to test the significance of instantaneous indirect effect of innovation strategy,the conclusion that the innovation strategy has the nonlinear intermediary effect between board diversity and short-term growth is found.(3)Adopting hierarchical linear model to test the cross-level effect of contexts on board diversity and innovation strategy.This paper introduces the external contexts such as industry environment and regional environment,layers the sample according to industry or region,adopts hierarchical linear model(HLM)to test the moderation effect of product market competition and regional economic development on the relationship between board diversity and innovation strategy,and finds that the product market competition and regional economic development significantly affects the relationship.