The Exploratory Mindset and Corporate Innovation
71 Pages Posted: 13 May 2019 Last revised: 15 May 2019
Date Written: May 13, 2019
We propose that CEOs with an exploratory mindset, proxied by having a PhD degree, are patient at managing innovation, possibly owing to their long-term orientation and strong intrinsic motivation. Firms with PhD CEOs produce more exploratory patents with greater novelty, generality and originality. PhD CEOs engage less in management for short-term results, invest more in R&D and strategic alliances, generate greater value of patents, and experience more positive market reactions to R&D alliances. They tend to be hired by firms with strong research opportunities but poor financial performance. Evidence from managerial incentive shocks and likely-exogenous CEO turnovers suggest that our results are not solely driven by CEO-firm matching. PhD firms are on average undervalued and subsequently achieve positive abnormal returns and superior long-run operating performance.
Keywords: exploration, long-term mindset, PhD CEO, innovation, intrinsic motivation, patience, managerial short-termism
JEL Classification: G30, O31, J44
Suggested Citation: Suggested Citation