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Innovation for promotion: The effect of executive involvement on inventors' innovation choice

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  • Liu, Guanchun
  • Lu, Di
  • Yang, Jinyu

Abstract

The direct participation of executives in patenting activities (executive involvement) can be advantageous due to executives' extensive managerial skills and industry experience but could also lead to managerial rent-seeking, which can distort inventors' innovation choices. Analyzing a large patent dataset and public personal information regarding executives in Chinese listed firms from 2000 to 2017, we find that executive involvement increases the exploitative patent output but not the explorative patent output of connected inventors. We conduct several robustness tests and provide evidence of managerial rent-seeking. Moreover, we reveal that promoting connected inventors decreases the innovation output of unconnected inventors within a firm, making these inventors more likely to switch jobs. Overall, the findings suggest that executive involvement lowers firm innovation quality and diminishes firm performance. These findings suggest that improved external monitoring and evaluation could mitigate the negative effects of executive involvement.

Suggested Citation

  • Liu, Guanchun & Lu, Di & Yang, Jinyu, 2023. "Innovation for promotion: The effect of executive involvement on inventors' innovation choice," Journal of Corporate Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000433
    DOI: 10.1016/j.jcorpfin.2023.102394
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    More about this item

    Keywords

    Executive involvement; Corporate innovation; Rent-seeking; Inventors’ incentives; Internal governance;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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