Do General Managerial Skills Spur Innovation?
Working Paper Author/Authors
Abstract
We show that firms with chief executive officers (CEOs) who gain general managerial skills over their lifetime work experience produce more patents. We address the potential endogenous CEO-firm matching bias using firm-CEO fixed-effects and variation in the enforceability of non-compete agreements across states and over time during the CEO’s career. Our findings suggest that generalist CEOs spur innovation because they acquire knowledge beyond the firm’s current technological domain, and have skills that can be applied elsewhere should innovation projects fail. We conclude that an efficient labor market for executives can promote innovation by providing a mechanism of tolerance for failure.
© Claudia Custodio, Miguel Ferreira, Pedro Matos, 2013
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