CEO innovation orientation and R&D intensity in small and medium-sized firms: the moderating role of firm growth

Abstract

Although upper echelon literature has found evidence for the effect of executives' characteristics on firm strategy such as the level of research and development (R&D) intensity, research on how different behaviors, values, personalities, motivations, and experiences of executives influence the R&D intensity of small and medium-sized firms is scarce. Applying upper echelon theory, this study uses firm growth (sales and employee growth) as a contingency factor to analyze variations in the effect of chief executive officer (CEO) innovation orientation on R&D intensity in small and medium-sized firms. As research on the direct effect of firm growth on R&D intensity is inconclusive, this study applies firm growth as an indirect effect to show whether the impact of CEO innovation orientation on R&D intensity differs in times of low growth compared to times of high growth in small and medium-sized firms. Using a sample of 77 German CEOs of small and medium-sized firms operating in manufacturing industries, results show that CEO innovation orientation has a positive effect on R&D intensity, and firm growth affects this relationship. Specifically, high CEO innovation orientation has a positive effect on R&D intensity in firms with low growth, while its impact disappears in firms that experience strong growth. Implications and future research are discussed.

Big Egos Can Be Green: A Study of CEO Hubris and Environmental Innovation

“…Our study contributes to the UE research examining the influence of executives’ traits on corporate strategic decisions (Delgado‐García, La Fuente‐Sabaté and Manuel, ; Oh, Chang and Cheng, ; Piaskowska and Trojanowski, ) and on innovation in particular (Damanpour and Schneider, ; Kraiczy, Hack and Kellermanns, ; Musteen, Barker and Baeten, ). We extend this literature by examining the conditions under which CEO hubris supports green innovative strategies.…”

“…Some studies suggest that CEO risk-taking propensity acts as an important driver for general innovation (Gilley, Walters and Olson, 2002). For instance, Kraiczy, Hack and Kellermanns (2015) find that CEO risk-taking propensity positively affects product innovativeness. Musteen, Barker and Baeten (2010) show that the CEO liberal (as opposed to conservative) attitude toward change increases the likelihood of undertaking strategies to develop innovation.…”

The effect of public support on senior manager attitudes to innovation

“…Senior managers (e.g., founders, CEO and COO) are key drivers of innovation within organisations (Huang et al, 2012;Kraiczy et al, 2015a), particularly within micro and smaller firms where they possess significant power and discretion over strategic choices (Ahn et al, 2017;Marcati et al, 2008). Operating under bounded rationality, attitudes shape senior manager interpretation of the available strategic choices by guiding information search, processing and retention (Bohner and Dickel, 2011;Hambrick and Mason, 1984).…”

“…Within the context of innovation, attitudes, of employees and senior managers, have received much attention (e.g., Ahn et al, 2017;Antons and Piller, 2015;Kraiczy et al, 2015a;2015b), given their influence on the intentions, decisions and behaviours of individuals (Bohner and Dickel, 2011), and subsequently on the strategies and activity of organisations. Specifically, senior manager support for innovation and risk tolerance have been found to be important in creating an innovation-orientated climate within firms where innovation is adequately resourced and employees are encouraged to engage in innovation (Kraiczy et al, 2015a;2015b;Ling et al, 2008). Moreover, given the increasingly important role of external knowledge in the innovation process (Nieto and Santamaria, 2007;Rodriguez et al, 2017), extant work suggests that attitudes to external knowledge are important through their shaping influence on external knowledge activities (Ahn et al, 2017;Antons and Piller, 2015).…”

“…Redressing this is important as innovation-orientated attitudes significantly influence firm innovation activities, thus, positively changing such attitudes could amplify policymaker efforts to stimulate greater innovation behaviour (Wong and He, 2003) and result in longer-term impacts on firm innovation activities much sought by policymakers (Roper and Hewitt-Dundas, 2016). Thirdly, despite growing attention to individuals within the innovation process (Enkel et al, 2017;Kraiczy et al, 2015a), research has focused on the firm level impacts of public support (Kang and Park, 2012;Radas et al, 2015), thus limiting insight into the impacts on individual organisational members. Finally, despite constituting an increasingly prevalent component of the policy mix targeted to micro and smaller firms throughout Europe, empirical evidence on the effectiveness of innovation vouchers remains limited (Bakhshi et al, 2015;Sala et al, 2016).…”