When does co-leadership drive innovation? The non-linear effect of co CEOS’ power differences on R&D spending

Abstract

A co-leadership structure at the executive level is characterized by the presence of two co-CEOs exerting mutual influence on each other while working together towards common goals. This study relies on the unity of command and social comparison theories to investigate the relationship between power differences within co-CEO dyads and firm innovation. The results from a sample of US firms led by co-CEOs in the 2000 2016 period indicate an inverted U-shaped relationship, such that: 1) power differences between co-CEOs are positively related to firm innovation when power differences are below a high level; and 2) this positive relationship becomes negative as power differences become very large. This study improves upon Krause, Priem, and Love’s (2015) analysis by arguing that social psychological factors affect collaboration between co-CEOs and advances innovation literature by illustrating that the conditions under which a co-leadership structure promotes innovation are non-linear. These results suggest important implications for scholars and practitioners who are dealing with the strategic framing of the top executive team and aim at pursuing corporate results in terms of innovation.