Corporate Governance Mechanisms and Innovation Efficiency in the U.S. Healthcare Sector

This paper investigates how board level corporate governance mechanisms affect innovation efficiency in the U.S. healthcare industry. Drawing on agency and stewardship theory, we conceptualize innovation efficiency as the firm’s ability to convert R&D inputs into patenting outputs and operationalize it as the ratio of patents to R&D expenditure. We assemble a balanced panel of 63 NASDAQ listed healthcare firms over the 2020-2024 period. Using fixed effects panel regressions, we examine the role of board mechanisms in shaping innovation efficiency. Our findings show that board size is negatively and significantly associated with innovation efficiency. Average board tenure and CEO duality also exhibit negative and marginally significant effects, consistent with director entrenchment, weakened monitoring and increased risk aversion. By contrast, board independence does not display a significant relationship with innovation efficiency, while gender diversity shows a positive yet statistically weak association. The study advances corporate governance and innovation research by shifting attention from innovation intensity to innovation efficiency, providing sector specific evidence from a highly regulated and knowledge intensive industry, and questioning compliance oriented governance metrics in favor of board structures that strengthen information processing, monitoring and strategic agility.