Abstract
This study builds on insights from behavioral agency theory and upper echelon perspectives to examine the impact of CEO succession on firms’ post-succession R&D intensity. Drawing on behavioral agency theory, we analyze the CEO successor’s decision on R&D intensity after taking office when faced with risks and payoffs brought by R&D investments. The moderating effects of performance on succession and CEO successors’ age on the relationship between CEO succession and R&D intensity are also examined. By empirically analyzing a sample of Chinese listed companies during 2010–2016, we find that CEO successors tend to decline firm R&D intensity after taking office. Moreover, higher firm performance upon succession enhances CEO successors’ motivation to decline the R&D intensity post-succession; with the increase in CEO age, CEO successors’ motivation to decline firm R&D intensity weakens.
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Notes
According to the “Index to Scientific & Technical Proceedings (ISTP)” and the “Seventh Five-Year Plan” adopted by the Fourth Session of the Sixth National People’s Congress, the east, west, and central regions include the following, respectively: 1. Eastern Region: Beijing, Tianjin, Liaoning, Shanghai, Hebei, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, and Hainan; 2. Western Region: Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Inner Mongolia, and Guangxi; 3. Central Region: Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Hubei, and Hunan. The ordinal variable is set according to the degree of economic development and the activeness of innovation, with 0 adopted for the Western Region, 1 for the Central Region, and 2 for the Eastern Region.
In accordance with GuoKeFaHuo [2008] No. 172, “Administrative Measures for the Determination of High and New Technology Enterprises,” the industry is divided into high-tech and non-high-tech industry according to secondary codes, with 1 adopted for the former and 0 for the latter.
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Funding
The article is sponsored by the National Social Science Fund of China, with Program Number 17BGL112. The author appreciates the help of Miss Wenjia Zou, a postgraduate at ESCP Europe, in the paper writing.
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Liu, X. Fear to lose? An analysis of CEO successors’ decision-making regarding R&D intensity based on behavioral agency theory. Asian Bus Manage 22, 403–430 (2023). https://doi.org/10.1057/s41291-021-00172-0
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DOI: https://doi.org/10.1057/s41291-021-00172-0