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Do General Managerial Skills Spur Innovation?

Author

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  • Cláudia Custódio

    (Imperial College Business School, Imperial College London, London SW7 2AZ, United Kingdom; Centre for Economic Policy Research, London EC1V 3PZ, United Kingdom; European Corporate Governance Institute, B-1050 Brussels, Belgium)

  • Miguel A. Ferreira

    (Centre for Economic Policy Research, London EC1V 3PZ, United Kingdom; European Corporate Governance Institute, B-1050 Brussels, Belgium; Nova School of Business and Economics, 1099-032 Lisbon, Portugal)

  • Pedro Matos

    (European Corporate Governance Institute, B-1050 Brussels, Belgium; Darden School of Business, University of Virginia, Charlottesville, Virginia 22906)

Abstract

We show that firms with chief executive officers (CEOs) who gain general managerial skills over their lifetime of work experience produce more patents. We address the potential endogenous CEO–firm matching bias using firm–CEO fixed effects and variation in the enforceability of noncompete agreements across states and over time during the CEO’s career. Our findings suggest that generalist CEOs spur innovation because they acquire knowledge beyond the firm’s current technological domain, and they have skills that can be applied elsewhere should innovation projects fail. We conclude that an efficient labor market for executives can promote innovation by providing a mechanism of tolerance for failure.

Suggested Citation

  • Cláudia Custódio & Miguel A. Ferreira & Pedro Matos, 2019. "Do General Managerial Skills Spur Innovation?," Management Science, INFORMS, vol. 65(2), pages 459-476, February.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:2:p:459-476
    DOI: 10.1287/mnsc.2017.2828
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