Non-founder CEOs, R&D investment and output

Nan Xu, Hanyi Tian and Jing Cai

Nankai Business Review International, 2020, vol. 11, issue 2, 143-169

Abstract: Purpose - The purpose of this study is to investigate the impact of non-founder CEO succession on firms’ research and development (R&D) decision, and further explore its mechanism and economic consequences. Design/methodology/approach - Using founders’ personal-level information of entrepreneurial firms in the Chinese growth enterprise market from 2009 to 2015, the authors empirically investigate whether firms can be motivated to launch more R&D activities as the result of switching to non-founder CEOs. The author’s further test the impact of non-founder CEOs on R&D output to distinguish their motivation. Moreover, the authors use stepwise regression to explore the mechanism and possible channels. Findings - The authors find that R&D investment significantly increases in firms with non-founder CEOs and the R&D output that comes in the form of patent exhibits an upward trending in numbers, too, ruling out non-founder CEOs’ incentive to chase private benefits. Specifically, the authors find that non-founder CEOs can promote R&D investment through their more professional human capital and better internal control. The authors also show mitigating effects under different circumstances on the relationship between non-founder CEOs and R&D investment. Practical implications - This study helps the authors to understand the impact of non-founder CEO succession on R&D investment in emerging markets. It also indicates that human capital of non-founder CEOs is critical in driving firms’ innovation, proposing policy suggestions to improve formal intermediary labor market of professional CEOs. Originality/value - This study provides elaborate theoretical analysis and empirical tests on the mechanism and economic consequences of (non-)founders’ impact on R&D activities.

Keywords: R&D investment; R&D output; Founder CEO; Non-founder CEO (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:nbripp:nbri-10-2019-0049

DOI: 10.1108/NBRI-10-2019-0049

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