Ceos’ Marital Status and Corporate Innovation
Yang Zhang, Huanhuan Zheng, Desmond Lam, Xiaoqing Maggie Fu, and Mengling Li
kHUB post date: December 23, 2022
Originally published: February 23, 2022 (PDMA JPIM • Vol 39 • Issue 5 • September 2022)
Read time: 35 minutes
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Corporate innovation is an important driver of a firm's value and long-term growth. It is the outcome of the creation and/or recreation of new and existing knowledge as well as resources of a firm. Innovation adds values not only to the firm, but also to its suppliers and customers. Drawing on upper echelon theory, this paper examines the effect of the marital status of corporate executives on firms' innovation efficiency, as measured by R&D productivity. To do so, we combine financial data on U.S. listed firms with data on CEOs' identities, their compensations, and their firms' R&D productivity. Our results show a strong connection between unmarried chief executive officers (CEOs) among Standard & Poor's (S&P) 1500 companies and elevated levels of corporate innovation efficiency. The association continues to hold when we control for a set of CEO attributes and adopt alternative identification strategies such as propensity score matching and difference-in-difference analysis. Moreover, the observed positive impact is more pronounced when the CEOs have higher levels of discretion due to lower institutional shareholding and smaller firm size. Further evidence indicates that unmarried CEOs generate higher impact innovation and exhibit a greater tolerance for failure, which are the possible mechanisms that underpin the observed association between unmarried CEOs and superior innovation outcomes. Our findings have potential implications for understanding variations in innovation practices between firms and can help firms to identify executives who are more likely to generate innovation and drive growth via R&D. The latter will be particularly important during periods of firm expansion and downsizing.