Do General Managerial Skills Spur Innovation?

Do General Managerial Skills Spur Innovation?

Claudia Custodio, Miguel Ferreira, Pedro Matos

Series number :

Serial Number: 
376/2013

Date posted :

July 01 2013

Last revised :

October 02 2017
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Keywords

  • General human capital • 
  • innovation • 
  • Patents • 
  • R&D • 
  • Risk taking

We show that firms with chief executive officers (CEOs) that gather general managerial skills during their lifetime work experience produce more innovation. Firms with generalist CEOs invest more in R&D and produce more patents than those with specialist CEOs. Generalist CEOs also create more diverse and original patent portfolios.

We address the potential endogenous CEO-firm matching bias using firm fixed effects and the variation on the enforceability of non-competing agreements across states and time as an instrument for general managerial skills. Our findings suggest that generalist CEOs spur innovation because they have skills that can be applied elsewhere should risky innovation projects fail. We conclude that an efficient labor market for executives can promote corporate innovation by acting as mechanism of tolerance for failure.

Authors

Real name: 
Research Member
Darden School of Business, University of Virginia