The Innovation Effect: Friend, Foe, or Force in Corporate Governance?

Frame of the research. In an era of rapid technological progress, firms must adapt to an evolving corporate landscape where innovation presents both opportunities and challenges. Traditional corporate governance aims to ensure accountability and enhance performance, but its effectiveness may depend on a firm's innovation intensity. Purpose of the paper. This study explores how governance mechanisms function across firms with different R&D intensity levels, analysing the moderating role of innovation in the governance-performance relationship and identifying which features are most impactful in high- versus low-innovation environments. Methodology. A quantitative research design is employed, utilizing panel data regression models on a dataset of 4213 firm-year observations from 484 publicly traded US firms over a 10-year period. Results. Innovation significantly moderates the governance-performance link. Board independence and gender diversity have stronger positive effects in high-innovation firms, suggesting that independent, diverse boards enhance decision-making in complex environments. Conversely, board-specific skills do not exhibit the expected amplification, indicating that adaptability may be more valuable than technical depth in rapidly evolving contexts. Research limitations. The focus on large S&P 500 firms may limit generalizability to smaller or emerging-market firms. Alternative innovation and performance measures were not included. Managerial implications. High-innovation firms should prioritize board independence and diversity as strategic governance levers. Originality of the paper. The study advances governance research by showing that effectiveness varies by innovation intensity, challenging one-size-fits-all models and questioning assumptions such as the universal importance of CEO duality. It calls for more context-sensitive governance frameworks in innovation-driven settings.