CEO Characteristics and Firm R&D Spending

Vincent L. Barker , III () and George C. Mueller ()
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Vincent L. Barker , III: School of Business, University of Kansas, Lawrence, Kansas 66045
George C. Mueller: School of Business Administration, University of Wisconsin-Milwaukee, Milwaukee, Wisconsin 53201

Management Science, 2002, vol. 48, issue 6, 782-801

Abstract: Over the past fifteen years, a number of studies have examined the determinants of firm R&D spending. These studies, however, almost invariably focus on the role of firm or external ownership characteristics in predicting R&D spending while overlooking the attributes of the top managers involved in allocating corporate resources. In this study, we change that focus by empirically examining how R&D spending as compared to industry competitors varies at firms based on the characteristics of their CEOs. Using a sample of publicly traded firms, we find that CEO characteristics explain a significant proportion of the sample variance in firm R&D spending even when corporate strategy, ownership structure, and other firm-level attributes are controlled. In terms of individual CEO characteristics, we find that R&D spending is greater at firms where CEOs are younger, have greater wealth invested in firm stock and signifacant career experience in marketing and/or engineering/R&D. In contrast to existing theory, we find that the amount of a CEO's formal education had no significant association with R&D spending once a CEO has attained a college degree. However, significant R&D spending increases are found at firms where CEOs have advanced science-related degrees. From subgroup analyses, we further find that CEO effects on relative R&D spending increase with longer CEO tenure implying that CEOs, over time, may mold R&D spending to suit their own preferences. From these results, we make implications for both research on determinants of R&D spending and managerial practice.

Keywords: chief executives; research and development; innovation (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (310)

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