CEO cultural heritage and R&D expenditures

Yu Sung Ha, Jangkoo Kang and Kyung Yoon Kwon

International Journal of Finance & Economics, 2025, vol. 30, issue 2, 1390-1410

Abstract: This paper examines how the cultural heritage of chief executive officers (CEOs) in US firms affects research and development (R&D) investment. Utilizing economically significant and unexpected R&D‐increasing events, we examine how six dimensions of CEO cultural heritage—individualism, power distance, masculinity, uncertainty avoidance, long‐term orientation, and indulgence—influence it. We find that CEOs with a high–power distance heritage are more likely to increase R&D. We confirm that this effect of CEO power distance is robust to other cultural effects, the model specification, and endogeneity issues. We conjecture that CEOs with a high–power distance heritage are more likely to increase R&D expenditures because they use their power to pursue personal objectives. Consistent with our hypothesis, we find that R&D increases made by CEOs with a high–power distance culture generate significantly lower benefits in the future, reflecting the inefficiency of these R&D investment decisions.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:30:y:2025:i:2:p:1390-1410

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