Staggered boards and product innovations: Evidence from Massachusetts State Bill HB 5640

•Staggered boards positively influence firms’ product innovations by enhancing the long-term orientation and stability of boards and management teams.•In terms of product innovation, the advantages of staggered boards from their long-term orientation outweigh their disadvantages from managerial entrenchment.•Massachusetts State Bill HB 5640 offers us a quasi-natural experiment for the impact of staggered boards.•The positive effect of staggered boards on product innovations is stronger for firms with higher takeover vulnerability, with higher institutional ownership, and in industries with higher advertising expenditures. In this paper, we empirically investigate how staggered boards, a prevailing governance structure of high-tech firms, influence firms’ product innovations in the United States. We explore a quasi-natural experiment of a legislation change in Massachusetts that forced the adoption of staggered boards in 1990 for the causal effect of staggered boards. We find that, when compared with firms in other states, Massachusetts-incorporated firms without staggered boards before 1990 perform better with respect to product innovations once they adopt staggered boards after 1990. The positive effect of staggered boards on product innovations is stronger for firms with higher takeover vulnerability, with higher institutional ownership, and in industries with higher advertising expenditures. Such a positive effect is consistent with staggered boards’ long-term orientation and is further confirmed by treated firms’ better product quality after 1990.