The importance of diversity on boards of directors’ effectiveness and its impact on innovativeness in the bioeconomy

The study examines how diversity in boards of directors relates to corporate innovativeness. Grounded in the strategic importance of innovation for differentiation and long-term performance, the authors posit that board composition—across attributes such as education, age, and ethnicity—can shape culture and strategic alignment that support innovation. The research question investigates whether higher board diversity is associated with greater innovativeness, using top global innovators as a benchmark and comparing them to large pulp and paper (bioeconomy) firms, a mature industry undergoing transition to a bioeconomy. The hypothesis is that the most innovative companies should exhibit higher diversity in some or all measured board attributes versus bioeconomy companies.

The paper frames innovation as both a process and an organizational attribute, drawing on definitions by Zahra and Covin (1994), Baregheh et al. (2009), and Kimberly (1981). It highlights challenges in measuring innovativeness and common reliance on lagging technical indicators. It reviews the role of boards in corporate governance—oversight of strategy, culture, and ethics—and the rising importance of CSR and diversity (Kose & Senbet, 1998; Fuente et al., 2017). Prior work suggests diverse boards—by gender, age, experience—can foster constructive decision-making (Kiel & Nicholson, 2003; Macaulay et al., 2018). Evidence on gender diversity links female directors to better market performance and innovation outcomes in certain industries (Credit Suisse RI, 2012; Chen et al., 2018). The review cautions against tokenistic category filling, emphasizing diversity of thought and experience (Leszczyńska, 2018). The bioeconomy context (particularly pulp and paper) is described as technologically capable yet not recognized for innovativeness, despite sustainability advances and biorefinery development. The comparison with top innovators aims to probe whether board diversity differences help explain innovativeness gaps.

The study uses Boston Consulting Group’s 2018 Most Innovative Companies ranking to identify top innovators, combining executive surveys (inside and outside industry) and financial metrics (3-year TSR, revenue and margin growth) with weights of 30%/30%/40%. Ten leading bioeconomy (pulp and paper) firms were selected by revenue based on annual reports. For all companies, the authors collected board-level data from corporate websites and supplementary sources, compiling 315 data points on each director’s gender, age, education level and field, career background, and disciplinary breadth. Educational majors were categorized into five fields: Engineering (incl. computer science), Business, Social Sciences, Sciences, and Natural Resources (forestry). Education level was summarized using a mode-based coding: 1 = Bachelor’s, 2 = Master’s/MBA, 3 = Doctoral. Ethnic diversity was operationalized as the percentage of directors whose ethnicity differed from that suggested by the company’s head-office locale (e.g., non-local-minority categorization adjusted by company home country). The study acknowledges cross-national governance model differences (Nordic, two-tier German, one-tier Anglo-Saxon) and their potential to influence board roles and comparability. Limitations of BCG’s methodology (subjectivity, unknown respondent diversity) are noted, and the analysis complements it with objective board composition metrics.

- Board size: Both groups have similarly sized boards, averaging ~11 members. - Educational disciplines: Bioeconomy boards have a higher share of Business majors than Engineering (42% vs 24%), with an 18 percentage-point gap favoring Business. Most innovative companies show a smaller gap and relatively more Engineering representation (Business 38%, Engineering 29%). Bioeconomy boards have on average 11% more Business majors than the most innovative companies. Social Sciences and Sciences are low in both groups; Natural Resources (forestry) appears only in bioeconomy boards (2%). - Education level: Using the modal degree approach, innovative-company boards have a higher average degree level (1.8) than bioeconomy boards (1.5). Medians: 2.0 vs 1.5, indicating Master’s is the most common among top innovators, while bioeconomy boards are split between Bachelor’s and Master’s. - Ethnic diversity: Average minority ethnicity share is higher among the most innovative companies (19%) than bioeconomy companies (15%), with several bioeconomy boards exhibiting no ethnic diversity. The distribution shows more bioeconomy outliers with zero diversity. - Gender diversity: Identical averages across groups—25% female directors. Only Amazon approaches near parity; one bioeconomy firm (Arauco) has 0% women. No directors identified as gender-neutral. - Age: Bioeconomy boards average about 61 years; most innovative boards average about 59 years (approximately 4% lower). Innovative boards display a wider age spread, indicating greater age diversity. - Governance models: Most innovative companies are predominantly US-based (one-tier), while bioeconomy companies span one-tier, two-tier, and Nordic systems; differences may influence board roles but were diluted by sample diversity. Overall, greater engineering representation, higher education levels, higher ethnic and age diversity characterize the most innovative companies’ boards, while gender diversity is similar across groups.

The analysis indicates that multiple dimensions of board diversity—particularly ethnic and age diversity, along with higher educational attainment and stronger engineering representation—align with higher corporate innovativeness. These attributes are proxies for diversity of thought, which can enhance strategic oversight and the fostering of innovative culture. While prior literature cautions about large board sizes reducing effectiveness, both samples had modest board sizes (~11), mitigating this concern. The lack of difference in gender diversity (both at 25%) suggests gender composition alone did not distinguish innovators from bioeconomy firms in this sample, although literature points to thresholds (e.g., at least three women) for measurable impact and broader performance benefits. The younger average and wider age dispersion in innovative boards may contribute to agility and openness to novel business models and technologies. Ethnic diversity differences were the most pronounced, supporting research that racial diversity can improve decision-making and innovation. Educational findings—higher degree levels and more engineering majors among innovators—underscore the value of technical expertise on boards for driving internal innovation, beyond business-model innovation alone.

This study contributes evidence that board diversity across multiple dimensions—ethnicity, age, education level, and disciplinary background—is associated with higher innovativeness, while gender diversity was similar and sub-par in both groups. Compared to large bioeconomy firms, boards of top innovators tend to include more engineers, higher educational attainment, greater ethnic diversity, and broader age ranges. Practically, companies—particularly in mature industries—should prioritize recruiting directors with diverse ethnic backgrounds, younger and varied ages, and stronger technical expertise, while also improving gender balance toward parity and ensuring at least three female directors to realize benefits observed in prior research. Future research could expand samples across industries and regions, incorporate longitudinal designs to assess causal effects of board changes on innovation outcomes, refine measures of innovativeness beyond BCG rankings, and examine interactions between governance models and diversity attributes.

- Innovativeness benchmark relies on BCG’s 2018 ranking, which includes subjective executive surveys with unknown respondent diversity and potential biases. - Small, selected samples (10 top innovators; 10 large bioeconomy firms) limit generalizability. - Cross-national governance model differences (one-tier, two-tier, Nordic) affect board roles and comparability. - Ethnicity categorization based on company home locale is a coarse proxy and may misclassify in multinational contexts. - Data sourced primarily from public disclosures; incomplete biographies may understate certain attributes. - Gender analysis limited to male/female categories; no data on non-binary directors. - The study is correlational; it does not establish causality between board diversity and innovativeness.