Following the emphasis on board diversity and its roles on firm performance, an examination on the relationship between board diversity and firm performance in the lodging industry is conducted. Further, this study employs internationalization, a moderator, to more comprehensively investigate the board diversity-firm performance relationship. This study found that gender diversity shows a positive and significant effect on firm performance while age diversity has an insignificant effect on firm performance. Regarding the moderating effect of internationalization, the degree of internationalization significantly magnifies the effect of gender diversity on firm performance but insignificantly moderates the effect of age diversity on firm performance. This study attempts to contribute to the hospitality and tourism literature by examining the topic that has been rarely dealt with and provide practical guidelines for stakeholders of a lodging firm especially when selecting board members.

Introduction

In accordance with a pivotal role of a board of directors on corporate governance and firm performance, shareholders need to consider various factors including work experience and compensation of candidate board members while composing a board (Milliken and Martins, 1996). Particularly, board diversity, defined as “variety in the composition of a board of directors” (Kang et al., 2007, p.2) has been one of the most critical issues associated with the effectiveness of the board and its influence on firm performance (Milliken and Martins, 1996). For example, National Association of Corporate Directors (NACD, 2012) supported shareholders’ assertion that demographic factors, such as gender and age should be evaluated in the selection of directors for corporate growth and better performance. And, Morgan Stanley Capital International industry reports covering 6,500 firms revealed that a firm with more diversified board is less likely to be damaged by corporate scandals including bribery and fraud of executive managers (Grene and Newlands, 2015). Similarly, the importance of board diversity has been enlarged in the hospitality industry. For example, in an annual report, InterContinental Hotels Group underscored various dimensions of diversity in a board for ensuring long-term and sustainable valuate creation (IHG, 2019). Following the emphasis on board diversity, to date, while multiple studies have explored the board diversity-firm performance relationship, empirical results have been inconclusive (Erhardt et al., 2003). A stream of researchers, based on the resource dependence theory and the human capital theory, found that board diversity has a positive effect on firm performance (Joecks et al., 2012; Erhardt et al., 2003; Kim et al., 2013). Contrarily, other studies, grounded on the social identity theory and the similarity-attraction paradigm, found a negative relationship between board diversity and firm performance (Treichler, 1995; Arena et al., 2015). Inconsistent empirical results may be attributable to multiple factors, such as industry-specific characteristics and operationalization of board diversity (e.g., gender, nationality, and age) (Jackson and Schuler, 1995; Oliver, 1997). Particularly, according to Guillen (2000), appropriate systems of corporate governance differ, contingent on industries, thus, the effect of board diversity on firm performance should be developed in the consideration of industry-specific characteristics.