R&D Subsidy, TMT Diversity and Innovation

Title:  R&D Subsidy, TMT Diversity and Innovation

Abstract : In this study we examine how top management team diversity shapes the effectiveness of R&D subsidies in promoting firms’ strategic innovation orientation and innovation outcomes. We focus on functional and international diversity. Based on a panel dataset of 700 publicly listed Chinese firms between 2008 and 2017, we find a positive interaction effect between both forms of TMT diversity and R&D subsidies on innovation outcomes, but no effect on strategic innovation orientation. By implication, our results show that managerial diversity promotes a more efficient use of R&D subsidies but does not lead to more crowding-in of R&D activity. In particular, we show that subsidized firms with a diverse composition of international and national managers get 29.9% more patents granted than less diverse subsidized firms. Our findings have important implications for the strategic management and innovation literature. We note key contributions for policymakers alike.