Do women board members make a company more innovative or risk-averse? The answer is both, according to our recent study. It all depends on how the company performs relative to its goals.

Professors Małgorzata Smulowitz, Didier Cossin and I examined 524 S&P 1500 companies from 1999 to 2016, measuring innovation through patent activity. Patents reflect both creative output and risk-taking. They require significant investment in novel ideas that might fail, disclosure of proprietary information and substantial legal costs. In short, patents represent genuine bets on the future.

Our findings revealed a striking pattern. When companies performed poorly in relation to their goals, they produced fewer patents after more women joined their boards.

However, companies exceeding their performance targets saw increased patent output as their number of women directors grew. Similarly, when companies were financially flush, there were more patents generated when their boards had more women.

The situation changed when we examined radical innovations, those patents in the top 10% of citations. For these high-risk, high-reward innovations, the risk-averse effect of women board members dominated.

When a company’s performance fell below aspirations, there were fewer radical innovations as its board gained female members. We found no corresponding increase in radical innovations when performance exceeded goals.

One finding surprised us. We predicted that boards with more women would reduce innovation when companies approached bankruptcy. Instead, it was the opposite: Boards with more women actually increased patent output as bankruptcy loomed. This suggests that women directors may fight harder for a company’s survival through innovation when facing existential threats.

© Fast Company