Non-founder CEOs, R&D investment and output: An empirical study based on Chinese growth enterprise market
Nankai Business Review International
ISSN: 2040-8749
Article publication date: 9 January 2020
Issue publication date: 18 May 2020
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
Acknowledgements
The authors confirm that there is no conflict of interest of all authors in this paper. This paper was supported by a grant from the National Natural Science Foundation of China (No.71602164 and No.71872151). All errors are our own.
Citation
Xu, N., Tian, H. and Cai, J. (2020), "Non-founder CEOs, R&D investment and output: An empirical study based on Chinese growth enterprise market", Nankai Business Review International, Vol. 11 No. 2, pp. 143-169. https://doi.org/10.1108/NBRI-10-2019-0049
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited