CEO Tenure and R&D Investment The Moderating Effect of Board Capital

• Published in: The Journal of applied behavioral science Vol. 49; no. 4; pp. 437 - 459
• Main Author: Chen, Hsiang-Lan
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA SAGE Publications 01.12.2013; SAGE PUBLICATIONS, INC
• Subjects: Capital; Chief executive officers; Chief executives; Choices; Consultants; Cultural Capital; Decision making; Decisions; Electronics industry; Expenditures; Innovations; Investment; R&D; Research & development; Research & development expenditures; Shareholders; Social capital; Stock Markets; Studies; Tenure; board human capital; board social capital; R&D investment; CEO tenure
• ISSN: 0021-8863; 1552-6879
• DOI: 10.1177/0021886313485129

This study examines the curvilinear CEO tenure–R&D investment relationship and the moderating influence of board capital on this relationship, thus making two major contributions. First, the finding of an inverted-U CEO tenure–R&D investment relationship enriches our understanding of how the CEO life cycle affects corporate investment decisions, particularly R&D. Second, the evidence of positive moderating effects of board human and social capital suggests that boards affect managerial choices through their human and social capital, thereby providing insight into how boards influence CEOs’ decision-making capabilities and, consequently, their R&D investment decisions. One important implication is that to encourage CEOs to invest in R&D, shareholders in the electronics industry and firms competing in innovation through R&D spending may consider appointing more directors with greater human and social capital to the Board because they will provide CEOs with ongoing advice and essential resources for R&D. The implications for strategy consultants are also discussed.