by Jonathan Bauweraerts, Emanuela Rondi, Paola Rovelli, Alfredo De Massis & Salvatore Sciascia
BEYOND PINK QUOTAS
Over recent years, gender or ‘pink quotas’ have been introduced Europe-wide to encourage the inclusion of women in boards of directors. While this has helped, it has not been totally effective. In most cases, the number of women directors is still limited to the minimum requirements and boards continue to be male-dominated. The issue is even graver in small private firms – not subject to the rule – where the quota of woman directors is today still well below the recommended thresholds. A trade-off emerges: on one hand, the law and the positive effect that compliance (imposed or dragged into) can have on the company reputation; and on the other, gender stereotypes, which famously hinder women’s climb up the hierarchical ladder. These stereotypes stand in the way of women being accepted and respected in the upper echelons where the most important strategic decisions are made.
THE FAMILY BUSINESS CONTEXT
Despite this tendency, family firms offer a relatively inclusive environment and seem to be a favorable context for women, allowing them to overcome barriers. Looking specifically at the upper echelons, family SMEs offer women – in particular those who are members of the owning family – greater opportunity to sit in the board compared to their non-family counterparts. Anecdotal evidence and recent research point to greater gender diversity on boards of family SMEs, i.e. more women directors, nevertheless these women continue to play more marginal and subtle family-linked roles. But what if the presence and active role of women in boards were, in fact, crucial for the future of the firm?
CREATIVITY AND INNOVATION
Our recent research on a sample of 280+ small and medium Belgian family firms has shown that the presence of women who are family members in boards can be a catalyst of innovation investments. Boards have been identified as protagonist of the innovation decision making and performance. They play an important role, impacting the collective interpretation of the strategic situation faced by the firm and, consequently, the quality of decisions made. Moreover, diverse groups can rely on a wider range of views, stimulate inquiry, improve brainstorming, encourage creativity and generate more alternative strategies. Men and women’s different experiences lead them to look at problems from different perspectives. Greater involvement of women contributes to increasing diversity, typically associated with high levels of creativity and innovation. Boards with greater gender diversity discuss and digest information from individual members more profoundly, thanks to women being more inclined to tolerance and interdependence, thereby encouraging collaboration. In short, greater gender diversity can promote creativity and innovation.
REAL POWER IN THE BOARD
However, to achieve this positive impact on innovation, women must have real power in the board so that they are heard and involved in decision making, rather than playing a marginal ‘invisible’ role. The sample of family firms we analyzed showed that women who are members of the owning family are effectively able to influence strategic innovation decisions and thus have an impact, especially when they are more than one. The fact that they belong to the owning family gives them legitimacy in the eyes of their male colleagues and enough power for their voice to be heard. Only by having this power women are able to be a stimulus for firm innovation. Interestingly, the study shows that a higher number of family women directors helps family SMEs to stimulate innovation, by increasing cognitive diversity (i.e. ideas, perspectives) and decision-making ability through access to a wider and more diverse knowledge base.
CRITICAL MASS AND FAULTLINES
The effect of family women in the board spurs innovation if the board involves a critical mass, meaning that it is crucial to have more than one family women director for the positive influence to reveal. Including only one family women director can lead to tokenism, a skewed imbalance of board members that is not beneficial to the diversity of the group. Increasing the board diversity blurs faultlines – hypothetical lines that divide a group into multiple subgroups based on the alignment of multiple individual attributes. When boards are male dominated, they are likely to include family and non-family directors, such attribute might create a faultline between the family sub-group and the non-family subgroup. By including family women, gender is introduced as an additional individual attribute to the board, leading family men to be aligned for one attribute to family women (family membership) and for another attribute to non-family men (gender). The increased complexity of the mosaic of individual attributes blurs barriers and stimulates exchange. Moreover, our research results reveal that the positive influence of family directors in the board on innovation investments weakens when the family has strong intention to retain control over the business without opening the governance to nonfamily members but is enhanced by the identification of family members with the firm and by the desire to renew family bonds through dynastic succession.
MORE THAN PRESENCE
Our study provides evidence for the fundamental importance of family women presence in the board for family firms’ innovative capacity. While policy makers have introduced stimuli for increasing women presence in boards as gender quotas, we underline that just being compliant to the requirements is not enough to benefit from gender diversity in the board. Nominating women to the board simply to comply with the law or to protect the firm’s reputation, without giving them the power to express themselves and be heard will in no way help companies to innovate. Being a member of the owning family might entail some level of legitimacy from family status, but this has to be transformed into the power of influencing the decision making of the board. If the inclusion of women in the board is merely limited to their presence, it would increase their frustration and perception of glass ceiling.
Our study also offers insights to non-family firms as well as family firms with women directors from outside the family, as organizations should strive to find ways to empower women if they want to benefit from their presence in the board. It is only by stimulating and nurturing organizational culture toward these themes and setting up practices aimed to foster a positive dialogue targeted to inclusion that gender diversity can really become beneficial to the future of firms in terms of innovation.
ABOUT THE AUTHORS
Jonathan Bauweraerts is Associate Professor at the Warocque School of Business and Economics – University of Mons (Belgium), where he is also Advisor to the Vice-Rector for Research, Innovation and Entrepreneurship.
Emanuela Rondi is Assistant Professor at the University of Bergamo (Italy) and member of the Center for Family Business Management at the Free University of Bozen-Bolzano (Italy).
Paola Rovelli is Assistant Professor at the Free University of Bozen-Bolzano (Italy), where she is also member of the Center for Family Business Management.
Alfredo De Massis is a Professor of Entrepreneurship & Family Business who serves as adviser to family enterprises and policy makers. As one of the leading family business academics globally, he has been included in Family Capital’s list of Top 100 Family Business Influencers in February 2022, is Editor of the influential journal Entrepreneurship Theory & Practice in the Financial Times rank of top 50 journals, is Associate Editor of Family Business Review, and serves on the boards of public and private organizations internationally.
Salvatore Sciascia is Full Professor at Cattaneo University – LIUC (Italy), where he is also Rector’s Delegate for Research and Co-director of FABULA (FAmily BUsiness LAb). He is also Affiliated Professor at the Centre for Family Entrepreneurship and Ownership (CeFEO) of Jonkoping International Business School (Sweden) and Contract Professor at Lucerne University of Applied Sciences (Switzerland). He sits in the editorial board of five scientific journals and servers as adviser to family enterprises and policy makers in the field of strategy and governance.