Operating Cash Flows, Board Characteristics and Adoption of IR 4.0 Technologies

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Shu-Fen Chuah
Char-Lee Lok
Chee-Wooi Hooy


Manuscript type: Research paper
Research aims: This study examines the effect of operating cash flows
(OCF) on firm innovation, as represented by the adoption of fourth
industrial revolution (IR4.0) technologies. Board characteristics that act as
corporate governance mechanisms are introduced as moderators.
Design/Methodology/Approach: The study sample consists of 954
publicly listed firms traded on Bursa Malaysia in 2019. The logistic and
linear regression models are employed.
Research findings: Our study found that increasing OCF encourages
firm innovation. Both logistic and linear regressions show that board
size and board independence are positive moderators, while multiple
directorships and busy boards are negative. Chairman-CEO duality has
a direct negative impact on firm innovation and negatively moderates the
relationship between OCF and IR4.0 adoption in linear regression.
Theoretical contribution/Originality: This study proposed that the
adoption of IR4.0 technologies could be observed via (i) the hiring of
key personnel with IR4.0 experience, (ii) the appointment of a chief
information officer (CIO), (iii) the establishment of the technology
committee, and (iv) the acquisition of IR4.0 technology. The positive
findings highlight the importance of “quantity” within the board—having
a larger board size and more independent directors establishes a stronger
connection between the firm and additional resources, reinforcing the
positive association between operating cash flows and firm innovation.
Conversely, the “quality” of the board is equally vital. Chairman-
CEO duality, multiple directorships, and busy boards are shown to
reduce monitoring quality, thereby exerting a negative influence on the
relationship between operating cash flows and firm innovation.
Practitioner/Policy implication: This study reveals approaches firms
could undertake to welcome IR4.0 and improve firms’ corporate
governance policies, particularly those related to board-level policies
such as board size, board independence, chairman-CEO duality, multiple
directorships and busy board.
Research limitation: It is challenging to quantify firm innovation. The
mentioned approaches may only partially reflect the firms’ adoption of
IR4.0 technologies.


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