The costs and benefits associated with inventor CEOs

SeongK. Byun, Kathleen Fuller and Zhilu Lin

Journal of Corporate Finance, 2021, vol. 71, issue C

Abstract: This paper examines various firm policies that highlight the potential tradeoffs associated with hiring CEOs with hands-on innovation experience. In addition to generating more patents, innovative CEOs also convert those patents into new services and products, as proxied by new trademark registrations. On the other hand, innovative CEOs do not receive higher pay compared to non-innovative CEOs, suggesting that innovative CEOs may receive other nonpecuniary benefits. Furthermore, innovative CEOs invest more in R&D leading to lower efficiency, hold more cash, and utilize less debt. In spite of these costs, it appears that hiring innovative CEO is still optimal for firms. We find that the improvements in corporate governance do not lead to changes in firm policies, suggesting that shareholders are willing to tolerate the potential costs associated with innovative CEOs.

Keywords: Corporate innovation; Inventor CEOs; CEO characteristics; Managerial experience; Human capital (search for similar items in EconPapers)
JEL-codes: G30 J24 J30 O31 O32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:71:y:2021:i:c:s0929119921002169

DOI: 10.1016/j.jcorpfin.2021.102094

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