Do General Managerial Skills Spur Innovation?
Management Science Forthcoming
74 Pages Posted: 2 Apr 2018
Date Written: September 22, 2017
We show that firms with chief executive officers (CEOs) who gain general managerial skills over their lifetime work experience produce more patents. We address the potential endogenous CEO-firm matching bias using firm-CEO fixed-effects and variation in the enforceability of non-compete agreements across states and over time during the CEO’s career. Our findings suggest that generalist CEOs spur innovation because they acquire knowledge beyond the firm’s current technological domain, and have skills that can be applied elsewhere should innovation projects fail. We conclude that an efficient labor market for executives can promote innovation by providing a mechanism of tolerance for failure.
Keywords: General human capital, Innovation, Patents, R&D, Risk taking
JEL Classification: G32, J24, O31
Suggested Citation: Suggested Citation