Are Researcher CEOs Better Innovators?

Abstract

This paper investigates the impact of CEO research experience on corporate innovation. We show that firms managed by researcher CEOs have significantly higher investments in innovative activities and generate more innovation output. In addition, we show that researcher CEOs accomplish this improvement by increasing firms’ innovative effectiveness. In particular, CEO research experience has a substitution effect for hiring more R&D employees. Further evidence suggests that our results are mainly driven by CEOs’ work experience in research institutions. We employ CEO exogenous turnover and demonstrate that the impact of CEO research experience on corporate innovation is causal. Moreover, we show that the effect of researcher CEOs on innovation is stronger for firms with high analyst coverage or high long-term institutional ownership. Overall, our findings suggest that researcher CEOs are better innovators and help promote corporate innovation.

Keywords: Corporate innovation; CEO research experience; Innovative effectiveness; Analyst coverage; Institutional ownership

JEL Classification: G34, J24, O31, O32