Impact of top executive turnover on firms’ R&D investment: evidence from China

Abstract

Though top executive turnover's economic consequence is highlighted in earlier studies, its link with innovation behaviour has remained relatively underexplored. This study aims to fill this gap through investigating whether, and if so, how, top executive turnover event influences firms' R&D investment. Based on a sample of 2,810 A-share listed companies in China for the period 2008-2016, our results suggest that top executive turnover is negatively related to enterprises' R&D investment. This is mainly because top executive turnover increases the departure rate of R&D personnel, which worsens enterprises' internal R&D environment. The findings also indicate that the negative effect of top executive turnover on R&D investment is accentuated for family enterprises and non-stateowned corporations. Our results have implications for the literature on top executive turnover and enterprises' innovation behaviour and can inform practice, particularly with respect to the selection of top management team members.

CSR Disclosure: Effects of Political Ties, Executive Turnover and Shareholder Equity. Evidence from China

“…It is the status of shareholding (SH) of the departing executive as to whether he/she is a large shareholder or a minor one [91,92]. Shareholding is a dummy variable that equals one if the firm's executive has large shareholding (10% or more of the shareholding in the year), and 0 otherwise [93].…”

The intergenerational succession and financialization of Chinese family enterprises: Considering the influence of heirs’ growing experience

“…In recent years, with Chinese family enterprises entering the succession stage gradually, Chinese scholars have been increasingly enriching their research achievements in this field. The achievements have not only covered traditional research topics ( Cai et al, 2019 ; Weng and Chi, 2019 ; Zhang and Luo, 2021 ), but also extended this research field based on the particularity of internal and external conditions faced by Chinese enterprises, such as CSR of intergenerational succession in family enterprises ( Chen, 2018 ), operational strategic capital ( Bin-Feng et al, 2022 ), investment in enterprise innovation ( Xiong et al, 2021 ) and so on. Moreover, mechanisms of more factors are further elucidated, including family board’s excessing control ( Liu et al, 2021 ), heirs’ education experience ( Zhu and Lv, 2019 ), first entrepreneurs’ altruism ( Zhu et al, 2021 ), and intergenerational transmission of political resources ( Yang et al, 2022 ).…”

Can digital transformation reduce R&D investment disruption during the top executive transition period?

“…In this paper, we attempt to investigate the impact of digital transformation on corporate research and development (R&D) investment disruption during the top executive transition period. Prior studies show that the leadership change may lead to strategy discontinuity (Schepker et al, 2017; Tushman & Rosenkopf, 1996; Zhang & Rajagopalan, 2010), such as disruptions in continuous R&D investment (Xiong et al, 2021). Possible explanations for the negative impact of top executive turnover (TET) on R&D investment are the uncertainty and resource loss caused by the departure of former executives, the successors' lack of specific knowledge and experience, as well as their myopia under performance pressure (Cummings & Knott, 2018; Lee et al, 2020).…”

“…Generally, departing and succeeding executives have highly distinct backgrounds, experiences, knowledge structures, and perceptions (Tushman & Rosenkopf, 1996; Zhang & Rajagopalan, 2010). These distinctions may prevent an organization from maintaining a cohesive and ongoing R&D strategy, especially during the top executive transition (Cummings & Knott, 2018; Lee et al, 2020; Xiong et al, 2021). Continuous R&D investments are critical for firms to remain competitive in the global market and improve long‐term value.…”