CEO foreign experience and corporate sustainable development: Evidence from China

Abstract

This study examines the impact of CEO foreign experience on corporate sustainable development from the angle of firm green innovation. Using manually collected data of CEOs' foreign experience, we find that CEO foreign experience is positively associated with firm green innovation in China. The positive relationship between CEO foreign experience and green innovation (including green invention patents and green utility model patents) is more significant when the firm is state owned, when the firm has better corporate governance, and when the firm is subject to a better institutional environment. Further analyses indicate that both foreign work and foreign educational experiences matter; relative to experiences gained in underdeveloped countries, those related to developed economies tend to be more influential in facilitating green innovation. Finally, the documented association is robust to a series of robustness checks, including propensity score matching, instrumental variable approach, Heckman two‐stage model, and the inclusion of firm fixed effects. Overall, this paper contributes to the upper echelons perspective, and it also offers clear practical implications through showing that hiring returnee CEOs can enhance firms' sustainable development, which could be of interest to policy makers in other emerging markets.

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“…where i denotes enterprise, t denotes year, and ε it and δ it denote the error terms. FE denotes the three-way fixed effects following the research standard (Shahab et al, 2019;Ren et al, 2021;Wang et al, 2022): 1) the individual fixed effect, measured by dummies of each enterprise, accounting for possible factors relating to specific enterprise, such as brands. 2) The industry fixed effect, measured by the two-digit SIC industry level (manufactory is divided by the three-digit SIC industry level), accounts for possible factors relating to a specific industry such as industry-specific subsidies.…”

“…3) The time fixed effect, measured by dummies of each year, accounts for time-variant characteristics of each year such as yearly policies. To avoid possible endogenity (such as invert causality), we lag the righthand variables for one period following the classical approach (Flammer et al, 2019;Saeed et al, 2022;Wang et al, 2022).…”