Abstract

The purpose of this study is to investigate whether a firm’s ownership structure and board characteristics influence its capacity for innovation and organizational performance, based upon the available data for listed and over-the-counter (OTC) firms in Taiwan. This paper uses two basic methods for data collection: data regarding ownership structures and board characteristics were collected from the Taiwan Economic Journal (TEJ), and data regarding organizational innovation and performance were collected through a questionnaire. By employing a hierarchical regression methodology, the study developed the following findings. First, ownership structure has a significant relationship with production, process, management, and marketing innovations, respectively, the primary effects of which are as a consequence of the positive effect of institutional ownership, while the secondary effects result from the negative effect of insider ownership. Second, board characteristics have a significant relationship with production, process, and marketing innovations, respectively. The outcome can be attributed primarily to the positive effect of the proportion of outside directors and supervisors. Finally, this study finds that organizational innovation is the mediator between the corporate governance mechanism and organizational performance. In addition, the implications for future research and practice are discussed.

Key words: Ownership structure, board characteristics, organizational innovation, organizational performance, hierarchical regression, mediating effect.