Corporate executives with financial backgrounds: The crowding-out effect on innovation investment and outcomes

Baohua Liu, Wei Zhou, Kam C. Chan and Yining Chen

Journal of Business Research, 2020, vol. 109, issue C, 161-173

Abstract: This study examines the impact of corporate executives with financial backgrounds (FBs) on firm innovation. Our findings suggest that firms that have more executives with FBs engage in less innovation than firms that have fewer executives with FBs. Compared to firms with fewer executives with FBs, firms that have disproportionately more executives with FBs invest in more financial assets, invest in fewer fixed assets, spend less on R&D (innovation input), and experience more severe financial constraints. This phenomenon corroborates the logic of the crowding-out effect, which serves as a transmission mechanism in the negative causal relationship between executives’ FBs and firm innovation. Our findings also suggest a moderating effect in that the negative impact of executives’ FBs on innovation is less pronounced when firms have a stronger corporate governance.

Keywords: Innovation; Financial background; Executives; Crowding out (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:109:y:2020:i:c:p:161-173

DOI: 10.1016/j.jbusres.2019.11.055

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