Does separate control improve innovation? An analysis of the impact of two-tier governance structure on research and development investments

This study investigates how corporate board structure influences research and development (R&D) investments, specifically comparing one-tier and two-tier governance systems in French firms. Using agency and upper echelon theories as a foundation, the research employs a fixed-effects panel regression analysis on an unbalanced panel dataset of 104 French firms in R&D-intensive industries, covering 953 observations from 2015 to 2024. The findings reveal that firms with a two-tier board structure invest significantly less in R&D than those with a one-tier structure. By extending agency theory’s insights into the separation of control and management, this study provides empirical evidence on how governance structures shape strategic innovation decisions. The results challenge conventional assumptions about governance efficiency and CEO personal characteristics, offering practical implications for firms, policymakers, and researchers seeking to optimise governance frameworks for fostering innovation.