PurposeBased on the socioemotional wealth theory, this study aims to empirically investigate how founder reign, that is a founder serving as a cheif executive officer (CEO) or chairman, influences family firms' research and development (R&D) investment in emerging economies (e.g. China).Design/methodology/approachThis study empirically tested the hypotheses based on a sample of listed Chinese family companies from 2008 to 2018.FindingsFounder reign has a negative impact on family firms' R&D investment. Particularly, the negative impact of the founder serving as chairman on family firms' R&D investment is larger than the negative impact of the founder serving as CEO on family firms' R&D investment. Founder's military experience weakens the negative impact of founder reign on family firms' R&D investment, but founder's executive master of business administration (E)MBA experience has no moderating effect on this relationship.Originality/valueFirst, the authors contribute to the family firm innovation literature by providing an alternative but complementary explanation of why family firms have relatively low R&D investment levels. This research shows that founder reign is a key reason for family firms in China eschewing R&D investment. Second, by incorporating the founder serving as CEO and the founder serving as chairman into the analytical framework, and then examining their impact on family firms' R&D investment, our research helps us to fully understand the impact of founder reign on firm strategic actions. Third, we contribute to the “founder reign-firm strategic actions” framework by revealing how founders' human capital profoundly affects the relationship between founder reign and family firms' R&D investment.
Based on signaling theory, we explore the impact of corporate fraud on firms' innovation performance. First, we propose that corporate fraud harms firms' innovation performance. This is because, as a negative signal, fraud makes it difficult for firms to obtain the policy, funding, and human resources needed for outstanding innovation performance. We further argue that the institutional aspects of the signaling environment (e.g., industrial competition, regional institutional development, and social trust) will influence core stakeholders' reception and interpretation of fraud signals. These factors, in turn, moderate the signaling effect of corporate fraud on firms' innovation performance. Our views are supported by empirical and robustness tests using Chinese A-share listed firms from 2010 to 2019.
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