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CEO Characteristics and Firm R&D Spending

Author

Listed:
  • Vincent L. Barker , III

    (School of Business, University of Kansas, Lawrence, Kansas 66045)

  • George C. Mueller

    (School of Business Administration, University of Wisconsin-Milwaukee, Milwaukee, Wisconsin 53201)

Abstract

Over the past fifteen years, a number of studies have examined the determinants of firm R&D spending. These studies, however, almost invariably focus on the role of firm or external ownership characteristics in predicting R&D spending while overlooking the attributes of the top managers involved in allocating corporate resources. In this study, we change that focus by empirically examining how R&D spending as compared to industry competitors varies at firms based on the characteristics of their CEOs. Using a sample of publicly traded firms, we find that CEO characteristics explain a significant proportion of the sample variance in firm R&D spending even when corporate strategy, ownership structure, and other firm-level attributes are controlled. In terms of individual CEO characteristics, we find that R&D spending is greater at firms where CEOs are younger, have greater wealth invested in firm stock and signifacant career experience in marketing and/or engineering/R&D. In contrast to existing theory, we find that the amount of a CEO's formal education had no significant association with R&D spending once a CEO has attained a college degree. However, significant R&D spending increases are found at firms where CEOs have advanced science-related degrees. From subgroup analyses, we further find that CEO effects on relative R&D spending increase with longer CEO tenure implying that CEOs, over time, may mold R&D spending to suit their own preferences. From these results, we make implications for both research on determinants of R&D spending and managerial practice.

Suggested Citation

  • 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.
    • Handle: RePEc:inm:ormnsc:v:48:y:2002:i:6:p:782-801
    DOI: 10.1287/mnsc.48.6.782.187
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    References listed on IDEAS

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