Companies employ three main strategies: product leadership, customer intimacy, and operational excellence. Differentiation in mature industries necessitates innovation, impacting not only products but also organizational strategy, structure, systems, and leadership. Effective alignment of these elements optimizes resource deployment. The board of directors plays a crucial role, overseeing executive management and ensuring alignment with shareholder and stakeholder interests. Board oversight includes approving and monitoring business strategy, influencing corporate culture to foster innovation, and operating through committees focusing on various aspects, including increasingly, ethics, corporate social responsibility, and diversity. Innovation is vital for long-term corporate performance and growth, representing the ability to identify and exploit new opportunities. Defining innovation as an organizational attribute, the study uses the Boston Consulting Group's (BCG) ranking of the most innovative companies as a benchmark. BCG's methodology incorporates both executive surveys and financial metrics to assess companies' innovation capabilities. The study compares the top ten most innovative companies globally to the ten largest companies in the bioeconomy (using the pulp and paper industry as a case study) to examine how board composition affects innovativeness. The bioeconomy, utilizing renewable resources, presents significant potential for innovation across various sectors, including biotechnology, nanotechnology, and smart manufacturing. The pulp and paper industry, despite past efforts in sustainability, isn't widely known for its innovativeness, creating an interesting contrast for study.

Existing research extensively covers the board of directors' role and impact on corporate performance. However, the link between board diversity and corporate innovativeness remains under-explored. Studies show a correlation between female board representation and innovation effectiveness (measured by R&D expenditures and citations), especially in innovation-driven sectors. Debates about board diversity often center on gender, ethnicity, and independence. However, the argument for diverse boards extends beyond simply filling quotas; a diversity of perspectives is crucial for robust discussions and well-rounded decision-making. The selection of directors should prioritize varied backgrounds, skills, and experiences, reflecting the company's present and future needs.

The study uses BCG's 2018 ranking of the most innovative companies as its primary dataset for the 'most innovative' group. BCG's methodology incorporates executive surveys (ranking companies within and outside their industries) and financial metrics (TSR, revenue, and margin growth) to rank global companies. The ten largest pulp and paper companies are selected to represent the bioeconomy group, based on their reported revenues. Data on board composition (315 data points) are collected from company websites and other sources. The data covers various diversity attributes, including gender, age, educational background (categorized into engineering, business, social sciences, science, and natural resources), and ethnic diversity (defined as the percentage of board members from minority ethnic backgrounds relative to the company's headquarters location). Different corporate governance models (Anglo-Saxon, German, and Nordic) are acknowledged, with the Nordic model characterized by stronger shareholder control and stricter accountability compared to other models. The analysis compares the two groups regarding board size, educational disciplines, education level (using a modal average of Bachelor's, Master's/MBA, and Doctoral degrees), ethnic diversity, gender diversity, and average age. Normal distributions are used to visualize the data dispersion.

Both groups had similarly sized boards (average of eleven members). Bioeconomy companies showed a larger difference between the number of business and engineering majors on their boards (18 percentage points) than the most innovative companies (9 percentage points). Bioeconomy boards had 11% more business majors on average. The differences in social science and science majors were minor. The most innovative companies showed a slightly higher average education level (modal average of 1.8 degrees vs. 1.5 for bioeconomy companies), with Master's degrees being most common in the innovative companies and a mix of Master's and Bachelor's degrees in the bioeconomy companies. Ethnic diversity was significantly higher in the most innovative companies (19% vs. 15% for bioeconomy companies). Gender diversity was surprisingly identical (25%) in both groups. The average age of board members was 61 years for bioeconomy companies and 57 years for the most innovative companies, with the latter showing a broader age range. The most significant difference was in ethnic diversity, where the most innovative companies were 27% more diverse.

The findings provide insights into the impact of board diversity on innovation. Existing research often focuses on individual aspects of diversity (gender or age). This study uses multiple independent variables to examine their combined impact on innovativeness. The comparison of two distinct company groups, one known for innovation and the other less so, adds value to the analysis. Board size didn't significantly affect the results given the relatively small average board size of 11 members. Differences in governance models across the companies (one-tier, two-tier, and Nordic systems) introduce some limitations, impacting the board’s influence on executive management and shareholder engagement. However, the diverse metrics used mitigate these limitations to a degree. The observed diversity attributes (age, ethnicity, education) significantly impact the diversity of thought, leading to higher innovation. While gender diversity was identical in both groups (25%), this number remains low compared to the general population (50%). The similarity to the Stuart Board Index (SBI) average for S&P 500 companies suggests a broader industry trend. The low percentage may be related to the prevalence of masculine cultures in several countries where many of these companies operate. Prior research emphasizes the need for at least three female directors for a positive influence on company performance. Concerning age, the higher average age in bioeconomy companies, similar to the SBI average, might indicate less board turnover, hindering the recruitment of younger and more diverse leaders. The considerable difference in ethnic diversity highlights cultural and historical context; newer companies (the innovative companies) were founded in an era where diversity was more emphasized compared to bioeconomy companies. Regarding education levels, the higher education levels in innovative companies may facilitate greater innovation, particularly in high-tech sectors. The emphasis on core competencies and internal innovation within the most innovative companies, as highlighted by the high number of engineering majors, contrasts with the bioeconomy companies’ focus on expanding business models.

The study demonstrates a correlation between board diversity (particularly ethnic and educational diversity) and corporate innovativeness, using a comparison of highly innovative companies and a mature, but less innovative industry in transition. The lack of a significant difference in gender diversity, despite its importance, is notable and calls for further investigation. Future research could examine the dynamic impact of board diversity on innovation over time, investigate the causal mechanisms linking diversity to innovation, and explore the role of specific diversity attributes in different industries and cultural contexts. A longitudinal study would also be beneficial in gaining deeper insights.

The study's reliance on BCG's ranking of innovative companies introduces limitations stemming from potential biases in the survey methodology. The cross-sectional nature of the study limits its ability to establish causal relationships between board diversity and innovation. The comparison of different corporate governance models across the companies introduces potential confounds, though efforts were made to address these limitations through the use of diverse metrics. Finally, the focus on only ten companies in each group might not be fully representative of the broader population of companies in each sector.