When Corporate Governance becomes Necessary: Board Mechanisms and Innovation Efficiency

Frame of the research. Research on corporate governance and innovation has predominantly relied on sufficiency-based models that estimate average effects of board mechanisms, offering limited insight into whether certain governance mechanisms are indispensable for innovation outcomes. This limitation is particularly salient in knowledge-intensive and highly regulated contexts such as the healthcare industry, where innovation efficiency is critical. Purpose of the paper. This study investigates whether board-level corporate governance mechanisms constitute necessary conditions for achieving innovation efficiency, understood as the effective transformation of R&D investments into patented innovation outputs. Methodology. The paper employs Necessary Condition Analysis (NCA) to examine whether board size, board independence, board gender diversity, board tenure, and CEO duality represent necessary consitions for innovation efficiency. Ceiling line estimation, permutation tests, and bottleneck analysis are employed. Results. The findings identify board independence as the only necessary condition for high innovation efficiency. Firms with insufficient board independence are unable to achieve high efficiency levels, regardless of R&D intensity. Other board mechanisms display weaker or non-significant necessity patterns. Research limitations. The study is constrained by a limited sample size, a short observation period, and a focus on the healthcare sector, which may affect generalisability. Managerial implications. The results suggest that board independence represents a non-negotiable governance foundation for innovation efficiency, while other board attributes should be adapted to firm-specific contexts. Originality of the paper. The study advances governance and innovation research by introducing necessity logic, reconceptualising innovation efficiency as a governance-relevant outcome, and demonstrating the non-compensatory role of board independence.