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Top Management Human Capital, Inventor Mobility, and Corporate Innovation

61 Pages Posted: 3 Sep 2015  

Thomas J. Chemmanur

Boston College - Carroll School of Management

Lei Kong

Boston College - Department of Finance

Karthik Krishnan

Northeastern University

Qianqian Yu

Boston College - Department of Finance; Boston College, Department of Finance, Students

Date Written: June 18, 2015

Abstract

We analyze the effect of the human capital or “quality” of the top management of a firm on its innovation activities. We extract a “management quality factor” using common factor analysis on various individual proxies for the quality of a firm's management team, such as management team size, fraction of managers with MBAs, the average employment- and education-based connections of each manager in the management team, fraction of members with prior work experience in a top management position, the average number of prior board positions that each manager serves on, and the fraction of managers with doctoral degrees. We find that firms with higher quality management teams not only invest more in innovation (as measured by R&D expenditures), but also have a greater quantity and quality of innovation, as measured by the number of patents and citations per patent, respectively. We control for the endogenous matching of higher quality managers and higher quality firms using an instrumental variable analysis where we use a function of the number of top managers who faced Vietnam War era drafts (and therefore had an incentive to go to graduate school to get a draft deferment) as an instrument for top management human capital. We also show that an important channel through which higher management quality firms achieve greater innovation success is by hiring a larger number of inventors (controlling for R&D expenditures), and also by hiring higher quality inventors (as measured by their prior citations per patent record). Finally, we show that firms with higher quality top management teams are able to develop a larger number of both exploratory and exploitative innovations.

Keywords: Corporate Innovation, Top Management Human Capital, Inventor Mobility

JEL Classification: G31, O31, O32, J24

Suggested Citation

Chemmanur, Thomas J. and Kong, Lei and Krishnan, Karthik and Yu, Qianqian, Top Management Human Capital, Inventor Mobility, and Corporate Innovation (June 18, 2015). Northeastern U. D’Amore-McKim School of Business Research Paper No. 2654416. Available at SSRN: https://ssrn.com/abstract=2654416 or http://dx.doi.org/10.2139/ssrn.2654416

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Lei Kong

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Karthik Krishnan

Northeastern University ( email )

360 Huntington Avenue
414C Hayden Hall
Boston, MA 02115
United States
617-373-4707 (Phone)

HOME PAGE: http://www.northeastern.edu/kkrishnan

Qianqian Yu

Boston College, Department of Finance, Students ( email )

Chestnut Hill, MA
United States

Boston College - Department of Finance ( email )

Lehigh University
621 Taylor Street
Bethlehem, PA 18015
United States

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