IDEAS home Printed from https://ideas.repec.org/a/eee/respol/v46y2017i10p1801-1809.html
   My bibliography  Save this article

Horizon problem and firm innovation: The influence of CEO career horizon, exploitation and exploration on breakthrough innovations

Author

Listed:
  • Cho, Sam Yul
  • Kim, Sang Kyun

Abstract

Building on labor market evaluations and legacy conservation motivation perspectives, we propose a mechanism to explain the relationship between CEO career horizons and breakthrough innovations. Using 10-year panel data from 681 U.S. firms, we find that firms that have a CEO with a short career horizon tend to produce fewer breakthrough innovations. We also find that the relationship between CEO career horizon and breakthrough innovation is partially mediated by R&D spending, and also moderated by organizational learning behavior (exploration vs. exploitation). This study highlights how a CEO’s motivation to protect success in the short term affects the firm’s innovativeness.

Suggested Citation

  • Cho, Sam Yul & Kim, Sang Kyun, 2017. "Horizon problem and firm innovation: The influence of CEO career horizon, exploitation and exploration on breakthrough innovations," Research Policy, Elsevier, vol. 46(10), pages 1801-1809.
    • Handle: RePEc:eee:respol:v:46:y:2017:i:10:p:1801-1809
    DOI: 10.1016/j.respol.2017.08.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0048733317301427
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.respol.2017.08.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. James G. March, 1991. "Exploration and Exploitation in Organizational Learning," Organization Science, INFORMS, vol. 2(1), pages 71-87, February.
    2. Rongxin Chen, 1996. "Technological Expansion: the Interaction Between Diversification Strategy and Organizational Capability," Journal of Management Studies, Wiley Blackwell, vol. 33(5), pages 649-666, September.
    3. Frances Westley & Henry Mintzberg, 1989. "Visionary leadership and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 10(S1), pages 17-32, June.
    4. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    5. Manuel Trajtenberg, 1990. "A Penny for Your Quotes: Patent Citations and the Value of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 172-187, Spring.
    6. Gautam Ahuja & Russell W. Coff & Peggy M. Lee, 2005. "Managerial foresight and attempted rent appropriation: insider trading on knowledge of imminent breakthroughs," Strategic Management Journal, Wiley Blackwell, vol. 26(9), pages 791-808, September.
    7. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
    8. Vincent L. Barker , III & George C. Mueller, 2002. "CEO Characteristics and Firm R&D Spending," Management Science, INFORMS, vol. 48(6), pages 782-801, June.
    9. Justin J. P. Jansen & Frans A. J. Van Den Bosch & Henk W. Volberda, 2006. "Exploratory Innovation, Exploitative Innovation, and Performance: Effects of Organizational Antecedents and Environmental Moderators," Management Science, INFORMS, vol. 52(11), pages 1661-1674, November.
    10. David Hirshleifer & Angie Low & Siew Hong Teoh, 2012. "Are Overconfident CEOs Better Innovators?," Journal of Finance, American Finance Association, vol. 67(4), pages 1457-1498, August.
    11. Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers 2001-29, Tel Aviv.
    12. Zona, Fabio, 2016. "Agency models in different stages of CEO tenure: The effects of stock options and board independence on R&D investment," Research Policy, Elsevier, vol. 45(2), pages 560-575.
    13. repec:fth:harver:1473 is not listed on IDEAS
    14. Hubert Gatignon & Michael L. Tushman & Wendy Smith & Philip Anderson, 2002. "A Structural Approach to Assessing Innovation: Construct Development of Innovation Locus, Type, and Characteristics," Management Science, INFORMS, vol. 48(9), pages 1103-1122, September.
    15. Zi-Lin He & Poh-Kam Wong, 2004. "Exploration vs. Exploitation: An Empirical Test of the Ambidexterity Hypothesis," Organization Science, INFORMS, vol. 15(4), pages 481-494, August.
    16. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Post-Print hal-00486653, HAL.
    17. Brickley, James A. & Linck, James S. & Coles, Jeffrey L., 1999. "What happens to CEOs after they retire? New evidence on career concerns, horizon problems, and CEO incentives," Journal of Financial Economics, Elsevier, vol. 52(3), pages 341-377, June.
    18. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    19. Daniel A. Levinthal & James G. March, 1993. "The myopia of learning," Strategic Management Journal, Wiley Blackwell, vol. 14(S2), pages 95-112, December.
    20. Donald C. Hambrick & Ian C. MacMillan & Ricardo R. Barbosa, 1983. "Business Unit Strategy and Changes in the Product R&D Budget," Management Science, INFORMS, vol. 29(7), pages 757-769, July.
    21. Wendy K. Smith & Michael L. Tushman, 2005. "Managing Strategic Contradictions: A Top Management Model for Managing Innovation Streams," Organization Science, INFORMS, vol. 16(5), pages 522-536, October.
    22. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    23. John E. Ettlie & William P. Bridges & Robert D. O'Keefe, 1984. "Organization Strategy and Structural Differences for Radical Versus Incremental Innovation," Management Science, INFORMS, vol. 30(6), pages 682-695, June.
    24. Christine M. Beckman & Pamela R. Haunschild & Damon J. Phillips, 2004. "Friends or Strangers? Firm-Specific Uncertainty, Market Uncertainty, and Network Partner Selection," Organization Science, INFORMS, vol. 15(3), pages 259-275, June.
    25. Dechow, Patricia M. & Sloan, Richard G., 1991. "Executive incentives and the horizon problem : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 14(1), pages 51-89, March.
    26. Lori Rosenkopf & Atul Nerkar, 2001. "Beyond local search: boundary‐spanning, exploration, and impact in the optical disk industry," Strategic Management Journal, Wiley Blackwell, vol. 22(4), pages 287-306, April.
    27. Gautam Ahuja & Curba Morris Lampert, 2001. "Entrepreneurship in the large corporation: a longitudinal study of how established firms create breakthrough inventions," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 521-543, June.
    28. Kevin Zheng Zhou & Fang Wu, 2010. "Technological capability, strategic flexibility, and product innovation," Strategic Management Journal, Wiley Blackwell, vol. 31(5), pages 547-561, May.
    29. Levinthal, Daniel & March, James G., 1981. "A model of adaptive organizational search," Journal of Economic Behavior & Organization, Elsevier, vol. 2(4), pages 307-333, December.
    30. Alberto Galasso & Timothy S. Simcoe, 2011. "CEO Overconfidence and Innovation," Management Science, INFORMS, vol. 57(8), pages 1469-1484, August.
    31. Mathew L. A. Hayward & Violina P. Rindova & Timothy G. Pollock, 2004. "Believing one's own press: the causes and consequences of CEO celebrity," Strategic Management Journal, Wiley Blackwell, vol. 25(7), pages 637-653, July.
    32. Melissa A. Schilling & Corey C. Phelps, 2007. "Interfirm Collaboration Networks: The Impact of Large-Scale Network Structure on Firm Innovation," Management Science, INFORMS, vol. 53(7), pages 1113-1126, July.
    33. Deeds, David L. & Decarolis, DONA & Coombs, Joseph, 2000. "Dynamic capabilities and new product development in high technology ventures: An empirical analysis of new biotechnology firms," Journal of Business Venturing, Elsevier, vol. 15(3), pages 211-229, May.
    34. Juha Uotila & Markku Maula & Thomas Keil & Shaker A. Zahra, 2009. "Exploration, exploitation, and financial performance: analysis of S&P 500 corporations," Strategic Management Journal, Wiley Blackwell, vol. 30(2), pages 221-231, February.
    35. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 29(7), pages 683-700, July.
    36. Krishna Palepu, 1985. "Diversification strategy, profit performance and the entropy measure," Strategic Management Journal, Wiley Blackwell, vol. 6(3), pages 239-255, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jingoo Kang & Sang‐Joon Kim, 2020. "Performance implications of incremental transition and discontinuous jump between exploration and exploitation," Strategic Management Journal, Wiley Blackwell, vol. 41(6), pages 1083-1111, June.
    2. Belderbos, Rene & Faems, Dries & Leten, Bart & Van Looy, Bart, 2009. "Technological activities and their impact on the financial performance of the firm: Exploitation and exploration within and between firms," MERIT Working Papers 2009-067, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Vanhaverbeke, W.P.M. & Beerkens, B.E. & Duysters, G.M., 2003. "Explorative and exploitative learning strategies in technology-based alliance networks," Working Papers 03.22, Eindhoven Center for Innovation Studies.
    4. Gatti, Corrado & Volpe, Loredana & Vagnani, Gianluca, 2015. "Interdependence among productive activities: Implications for exploration and exploitation," Journal of Business Research, Elsevier, vol. 68(3), pages 711-722.
    5. Zhang, Feng & Jiang, Guohua & Cantwell, John A., 2019. "Geographically Dispersed Technological Capability Building and MNC Innovative Performance: The Role of Intra-firm Flows of Newly Absorbed Knowledge," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    6. Chung-Jen Chen & Bou-Wen Lin & Jun-You Lin & Yung-Chang Hsiao, 2020. "Learning-from-parents: exploitative knowledge acquisition and the innovation performance of joint venture," The Journal of Technology Transfer, Springer, vol. 45(1), pages 228-258, February.
    7. Shuwaikh, Fatima & Brintte, Souad & Khemiri, Sabrina, 2022. "The impact of dynamic ambidexterity on the performance of organizations: Evidence from corporate venture capital investing in North America," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 991-1009.
    8. Jie Wu & Kathryn Rudie Harrigan & Siah Hwee Ang & Zefu Wu, 2019. "The impact of imitation strategy and R&D resources on incremental and radical innovation: evidence from Chinese manufacturing firms," The Journal of Technology Transfer, Springer, vol. 44(1), pages 210-230, February.
    9. Tabesh, Pooya & Vera, Dusya & Keller, Robert T., 2019. "Unabsorbed slack resource deployment and exploratory and exploitative innovation: How much does CEO expertise matter?," Journal of Business Research, Elsevier, vol. 94(C), pages 65-80.
    10. Feng Zhang & Guohua Jiang, 2019. "Combination of Complementary Technological Knowledge to Generate “Hard to Imitate” Technologies," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-24, June.
    11. Christopher Kurzhals & Lorenz Graf‐Vlachy & Andreas König, 2020. "Strategic leadership and technological innovation: A comprehensive review and research agenda," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 437-464, November.
    12. Corredoira, Rafael A. & Banerjee, Preeta M., 2015. "Measuring patent's influence on technological evolution: A study of knowledge spanning and subsequent inventive activity," Research Policy, Elsevier, vol. 44(2), pages 508-521.
    13. Yang, Hongyan & Steensma, H. Kevin, 2014. "When do firms rely on their knowledge spillover recipients for guidance in exploring unfamiliar knowledge?," Research Policy, Elsevier, vol. 43(9), pages 1496-1507.
    14. Hanne Peeters & Julie Callaert & Bart Looy, 2020. "Do firms profit from involving academics when developing technology?," The Journal of Technology Transfer, Springer, vol. 45(2), pages 494-521, April.
    15. Guktae Kim & Moon-Goo Huh, 2015. "Exploration and organizational longevity: The moderating role of strategy and environment," Asia Pacific Journal of Management, Springer, vol. 32(2), pages 389-414, June.
    16. Armin Anzenbacher & Marcus Wagner, 2020. "The role of exploration and exploitation for innovation success: effects of business models on organizational ambidexterity in the semiconductor industry," International Entrepreneurship and Management Journal, Springer, vol. 16(2), pages 571-594, June.
    17. Wang, Pengfei & Van De Vrande, Vareska & Jansen, Justin J.P., 2017. "Balancing exploration and exploitation in inventions: Quality of inventions and team composition," Research Policy, Elsevier, vol. 46(10), pages 1836-1850.
    18. Xiao, Fenglong, 2022. "Non-competes and innovation: Evidence from medical devices," Research Policy, Elsevier, vol. 51(6).
    19. Samina Karim & Aseem Kaul, 2015. "Structural Recombination and Innovation: Unlocking Intraorganizational Knowledge Synergy Through Structural Change," Organization Science, INFORMS, vol. 26(2), pages 439-455, April.
    20. Zhang, Feng & Jiang, Guohua & Cantwell, John A., 2015. "Subsidiary exploration and the innovative performance of large multinational corporations," International Business Review, Elsevier, vol. 24(2), pages 224-234.

    More about this item

    Keywords

    CEO career horizon; Breakthrough innovation; Risk aversion; Legacy conservation; Labor market evaluation; Organizational learning behavior;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • 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
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:46:y:2017:i:10:p:1801-1809. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/respol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.