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CEO Values, Firm Long-Term Orientation, and Firm Innovation: Evidence from Chinese Manufacturing Firms

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  • Zheng, Wei
  • Shen, Rui
  • Zhong, Weiguo
  • Lu, Jiangyong

Abstract

Innovation contributes to a firm's long-term competitive advantages but also involves significant risk and uncertainty. As agency theory predicts, CEOs are self-interested and risk-averse, and thus are reluctant to engage in innovation investments. However, the extent to which CEOs are self-interested and the mechanisms through which self-interested CEOs affect firm innovation have not been empirically tested. To fill this gap, we propose that CEOs possess a mix of both self-preserving and other-regarding motives, and build a mediation model in which CEO values affect firm innovation via firms’ long-term orientation. Based on a three-phase (from 2014 to 2016) survey of 436 Chinese manufacturing firms, we find that CEOs with high self-regarding values reduce innovation efforts and performance by damaging a firm's long-term orientation. Moreover, CEO tenure, CEO duality, and environmental uncertainty weaken the relationship between CEO values and firm innovation via long-term orientation. Our study enriches the innovation literature by extending the basic assumptions of agency theory and by providing empirical evidence to determine whether and how self-regarded CEOs affect firm innovation.

Suggested Citation

  • Zheng, Wei & Shen, Rui & Zhong, Weiguo & Lu, Jiangyong, 2020. "CEO Values, Firm Long-Term Orientation, and Firm Innovation: Evidence from Chinese Manufacturing Firms," Management and Organization Review, Cambridge University Press, vol. 16(1), pages 69-106, February.
    • Handle: RePEc:cup:maorev:v:16:y:2020:i:1:p:69-106_6
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    Cited by:

    1. Yang Liu & Han Zhang & Fukang Zhang, 2024. "The power of CEO growing up in poverty: Enabling better corporate environmental, social, and governance (ESG) performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 1610-1633, May.
    2. Amit Kumar & Arti Sharma & Chandan Maheshkar & Chandra Sekhar Patro & Deepti Sinha & Ernesto Guerra García & Gaurav Gupta & James Phelan & Jeremy Kwok & Joana Vassilopoulou & José G. Vargas-Hernández , 2023. "Handbook of Research on Cross-culture Business and Management," Vernon Press Titles in Economics, Vernon Art and Science Inc, edition 1, number 1679.
    3. Radityo Putro Handrito & Hendrik Slabbinck & Johanna Vanderstraeten, 2023. "Stuck in short-term, daily operations, or not?: Unraveling SME’s long-term orientation," Small Business Economics, Springer, vol. 61(4), pages 1723-1745, December.
    4. Mariarosaria Agostino & Cristiana Donati & Sabrina Ruberto, 2023. "Family firms, political connections, and R&D activities in Eastern European Countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(3), pages 725-754, August.
    5. Zheng, Linglin (Gloria) & Wechtler, Heidi M. & Heyden, Mariano L.M. & Bouncken, Ricarda B., 2024. "Global disasters and the luck of the draw? A serendipity perspective on MNE responses to global disasters," Journal of International Management, Elsevier, vol. 30(1).
    6. Liu, Feifei & He, Xinming & Wang, Tao, 2023. "In the name of the family: The effect of CEO clan culture background on firm internationalization," Journal of Business Research, Elsevier, vol. 161(C).
    7. Liao, Zhongju & Xu, Lijun & Zhang, Mengnan, 2024. "Government green procurement, technology mergers and acquisitions, and semiconductor firms’ environmental innovation: The moderating effect of executive compensation incentives," International Journal of Production Economics, Elsevier, vol. 273(C).

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