The Exploratory Mindset and Corporate Innovation

Journal of Financial and Quantitative Analysis, forthcoming

87 Pages Posted: 13 May 2019 Last revised: 4 Sep 2020

See all articles by Zhaozhao He

Zhaozhao He

University of New Hampshire - Department of Accounting & Finance

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Date Written: August 30, 2020

Abstract

We propose that CEO exploratory mindset—inherent desire to search for novel ideas and long-term orientation—promotes innovation. Firms with PhD CEOs produce more exploratory patents with greater novelty, generality and originality. PhD CEOs engage less in managing earnings and stock prices, invest more in R&D and alliances, generate higher long-term value of patents, and experience more positive market reactions to R&D alliances. Their firms achieve superior long-run operating performance. They tend to be hired by research-intensive firms with poor financial performance. Evidence from managerial incentive shocks and turnovers suggests that these effects do not derive solely from CEO-firm matching.

Keywords: exploratory mindset, long-termism vs. short-termism, PhD CEOs, innovation

JEL Classification: G30, O31, J44

Suggested Citation

He, Zhaozhao and Hirshleifer, David A., The Exploratory Mindset and Corporate Innovation (August 30, 2020). Journal of Financial and Quantitative Analysis, forthcoming, Available at SSRN: https://ssrn.com/abstract=3378057 or http://dx.doi.org/10.2139/ssrn.3378057

Zhaozhao He (Contact Author)

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States
603-862-3355 (Phone)

HOME PAGE: http://sites.google.com/site/zhaozhaohe

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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