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.
Research Question/Issue Using data on Chinese listed state‐owned enterprises (SOEs), this study examines the impact of board surname sharing on firms' investment efficiency. Research Findings/Insights We find that surname sharing among a firm's board of directors is positively associated with its investment efficiency. The main result continues to hold when using alternative measures and accounting for endogeneity. Specifically, we show higher surname homogeneity mitigates agency costs and information asymmetry. Taken together, this evidence supports the view that board surname sharing is conducive to effective communications in the boardroom, thus enhancing board effectiveness and collective decision‐making among board members. Theoretical/Academic Implications With the theory of social identity, the literature presents two opposing views on the impact of group identity on corporate behaviors. One view focuses on the cost of favoritism bias and coalition while the other view illustrates the benefits of group coordination and communication. We shed light on this debate by documenting that the group identity of surname sharing might increase corporate investment efficiency. To our knowledge, this is the first study providing evidence that social identity benefits board decision‐making. Practitioner/Policy Implications Our findings have implications for formulating the “best practice” on executive selection and boosting board composition. In addition to structural factors and procedural rules, shareholders and policymakers may need to carefully consider creating the climate of a robust social system of the board to ensure a virtuous cycle of trust and outspokenness, especially when dealing with the problems of passive monitoring.
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