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CEO Characteristics and Firm R&D Spending

Listed author(s):
  • Vincent L. Barker , III


    (School of Business, University of Kansas, Lawrence, Kansas 66045)

  • George C. Mueller


    (School of Business Administration, University of Wisconsin-Milwaukee, Milwaukee, Wisconsin 53201)

Registered author(s):

    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 signifacant 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.

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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 48 (2002)
    Issue (Month): 6 (June)
    Pages: 782-801

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    Handle: RePEc:inm:ormnsc:v:48:y:2002:i:6:p:782-801
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    1. Danny Miller, 1991. "Stale in the Saddle: CEO Tenure and the Match Between Organization and Environment," Management Science, INFORMS, vol. 37(1), pages 34-52, January.
    2. Denis, David J. & Denis, Diane K. & Sarin, Atulya, 1997. "Ownership structure and top executive turnover," Journal of Financial Economics, Elsevier, vol. 45(2), pages 193-221, August.
    3. James P. Guthrie, 1997. "Contextual Influences on Executive Selection: Firm Characteristics and CEO Experience," Journal of Management Studies, Wiley Blackwell, vol. 34(4), pages 537-560, July.
    4. Rachel Davis & L. G. Thomas, 1993. "Direct Estimation of Synergy: A New Approach to the Diversity-Performance Debate," Management Science, INFORMS, vol. 39(11), pages 1334-1346, November.
    5. May, Don O, 1995. " Do Managerial Motives Influence Firm Risk Reduction Strategies?," Journal of Finance, American Finance Association, vol. 50(4), pages 1291-1308, September.
    6. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    7. John Child, 1974. "Managerial And Organizational Factors Associated With Company Performance Part I," Journal of Management Studies, Wiley Blackwell, vol. 11(3), pages 175-189, October.
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