Firm innovation as a business strategy of CEO power: Does national culture matter?

Abstract

The influence of chief executive officer (CEO) power on innovation has only briefly been the subject of study thus far creating a need for further exploration. The purpose of this research is to provide more evidence of the impact of CEO power on innovation as a business strategy. We also address the moderating effect that national culture has on the relationship between CEO power and innovation. The Thomson Reuters database provided the data for this research. The cohort of firms represents different countries, specifically, a sample of firms from 37 countries. To estimate the model, we used the generalised method of moments (GMM) procedure, an estimator that allows the researcher to control for unobservable heterogeneity and endogeneity. GMM also attenuates estimation bias. Our findings reveal that CEO power has a positive effect on innovation. In turn, the dimensions of national culture used here do not have the same moderating effect on the relationship between CEO power and innovation. Power distance and uncertainty avoidance negatively moderate the positive association between CEO power and innovation; individualism and indulgence reinforce the positive effect of CEO power on innovation; masculinity and long‐term orientation do not affect the relationship.