Experience as a double-edged sword: CEO experience and power on breakthrough innovation

Abstract

Purpose

In recent years, the trend of hiring external CEOs has become increasingly prevalent. However, the impact of these CEOs' prior experiences in different firms on the innovation of their successor firms has not received sufficient attention. Drawing on upper echelons theory and management power theory, this study explores the non-linear relationship between prior CEO experience and breakthrough innovation, as well as the moderating effects of different types of CEO power.

Design/methodology/approach

We selected China’s A-share listed manufacturing companies as samples and used zero-inflated Poisson regression to verify the hypothesis. We employed instrumental variable methodology to address potential endogeneity issues and conducted robustness tests by substituting core variables, changing measures, adding additional control variables, and shrinking the core variables.

Findings

We conclude that there exists an inverted U-shaped relationship between prior CEO experience and breakthrough innovation. Furthermore, we analyze the effects of formal and informal CEO power on the role of prior CEO experience in breakthrough innovation and find that the inverted U-shaped relationship is contingent upon the level of CEO power.

Originality/value

The findings extend research on CEO succession and offer a reference for firms aiming to hire external CEOs with prior experience to foster breakthrough innovation.

Citation

Ma, D. and Wu, W. (2024), "Experience as a double-edged sword: CEO experience and power on breakthrough innovation", Management Decision, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/MD-12-2023-2268