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CEO Values, Firm Long-Term Orientation, and Firm Innovation: Evidence from Chinese Manufacturing Firms

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  • Zheng, Wei
  • Shen, Rui
  • Zhong, Weiguo
  • Lu, Jiangyong

Abstract

Innovation contributes to a firm's long-term competitive advantages but also involves significant risk and uncertainty. As agency theory predicts, CEOs are self-interested and risk-averse, and thus are reluctant to engage in innovation investments. However, the extent to which CEOs are self-interested and the mechanisms through which self-interested CEOs affect firm innovation have not been empirically tested. To fill this gap, we propose that CEOs possess a mix of both self-preserving and other-regarding motives, and build a mediation model in which CEO values affect firm innovation via firms’ long-term orientation. Based on a three-phase (from 2014 to 2016) survey of 436 Chinese manufacturing firms, we find that CEOs with high self-regarding values reduce innovation efforts and performance by damaging a firm's long-term orientation. Moreover, CEO tenure, CEO duality, and environmental uncertainty weaken the relationship between CEO values and firm innovation via long-term orientation. Our study enriches the innovation literature by extending the basic assumptions of agency theory and by providing empirical evidence to determine whether and how self-regarded CEOs affect firm innovation.

Suggested Citation

  • Zheng, Wei & Shen, Rui & Zhong, Weiguo & Lu, Jiangyong, 2020. "CEO Values, Firm Long-Term Orientation, and Firm Innovation: Evidence from Chinese Manufacturing Firms," Management and Organization Review, Cambridge University Press, vol. 16(1), pages 69-106, February.
    • Handle: RePEc:cup:maorev:v:16:y:2020:i:1:p:69-106_6
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    Cited by:

    1. Mariarosaria Agostino & Cristiana Donati & Sabrina Ruberto, 2023. "Family firms, political connections, and R&D activities in Eastern European Countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(3), pages 725-754, August.
    2. Liu, Feifei & He, Xinming & Wang, Tao, 2023. "In the name of the family: The effect of CEO clan culture background on firm internationalization," Journal of Business Research, Elsevier, vol. 161(C).
    3. Radityo Putro Handrito & Hendrik Slabbinck & Johanna Vanderstraeten, 2023. "Stuck in short-term, daily operations, or not?: Unraveling SME’s long-term orientation," Small Business Economics, Springer, vol. 61(4), pages 1723-1745, December.

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