The Exploratory Mindset and Corporate Innovation

We propose that chief executive officer (CEO) exploratory mindset (inherent desire to search for novel ideas and long-term orientation) promotes innovation. Firms with CEOs with PhD degrees (PhD CEOs) produce more exploratory patents with greater novelty, generality, and originality. PhD CEOs engage less in managing earnings and stock prices, invest more in research and development (R&D) and alliances, generate higher long-term value of patents, and experience more positive market reactions to R&D alliances. Their firms achieve superior long-run operating performance. They tend to be hired by research-intensive firms with poor financial performance. Evidence from managerial incentive shocks and turnovers suggests that these effects do not derive solely from CEO-firm matching.

Automated summary

This study suggests that the exploratory mindset of chief executive officers (CEOs), characterized by a desire to search for novel ideas and a focus on long-term orientation, promotes innovation. CEOs with PhD degrees (PhD CEOs) produce more exploratory patents that are characterized by greater novelty, generality, and originality. These CEOs engage less in managing earnings and stock prices, and invest more in research and development (R&D) and alliances. The research findings also show that these PhD CEOs tend to be hired by research-intensive firms with poor financial performance, and their firms achieve superior long-run operating performance.