Content area
Full Text
Over the past fifteen years, a number of studies have examined the determinants of firm R&D spending. These studies, however, almost invariably focus on the role of
firm or external ownership characteristics in predicting R&D spending while overlooking the attributes of the top managers involved in allocating corporate resources. In this study, we change that focus by empirically examining how R&D spending as compared to industry competitors varies at firms based on the characteristics of their CEOs. Using a sample of publicly traded firms, we find that CEO characteristics explain a significant proportion of the sample variance in firm R&D spending even when corporate strategy, ownership structure, and other firm-level attributes are controlled. In terms of individual CEO characteristics, we find that R&D spending is greater at firms where CEOs are younger, have greater wealth invested in firm stock and significant career experience in marketing and/or engineering/R&D. In contrast to existing theory, we find that the amount of a CEO's formal education had no significant association with R&D spending once a CEO has attained a college degree. However, significant R&D spending increases are found at firms where CEOs have advanced science-related degrees. From subgroup analyses, we further find that CEO effects on relative R&D spending increase with longer CEO tenure implying that CEOs, over time, may mold R&D spending to suit their own preferences. From these results, we make implications for both research on determinants of R&D spending and managerial practice. (Chief Executives; Research and Development; Innovation)
Introduction
Spending money on research and development (R&D) is one of the most fundamental investment decisions made by top managers of many firms. Because firm investments in developing new products, processes, or technologies often are the driver of future competitive advantage and productivity (see Scherer 1984, Ettlie 1998), the factors associated with increased or decreased firm R&D spending have been the subject of a number of studies. Researchers have examined how R&D spending is influenced by a firm's industry (e.g., Scherer 1984), corporate strategy (e.g., Baysinger and Hoskisson 1989, Hoskisson and Hitt 1988, Baysinger et al. 1991), and institutional shareholders (Baysinger et al. 1991, Graves 1988, Hansen and Hill 1991) to name just a few factors. Despite this extensive line of research, little has been done...