"We find that CEO turnover is associated with significantly greater quantity and quality of future innovation, measured with the number of patents, citations, patents per research and development dollar, and citations per patent in the subsequent three year and five-year periods. New internal CEOs are associated with more and better innovation than new external CEOs. We also find that innovation quantity and quality are positively associated with CEO overconfidence, option compensation, and information asymmetries. These empirical results remain robust to controlling for potential endogeneity issues and confirm the critical role of CEOs in innovation performance."
a few look-ins:
"Although firm performance around the time of CEO turnover has received attention from previous studies (Murphy and Zimmerman, 1993), the effect of CEO turnover on innovation performance has not been previously studied."
and
"...we find that CEO turnover leads to significantly more patents and citations in the following five and three years. The occurrence of CEO turnover increases the number of patents over the following five-year and three- year periods by 106% and 99%, respectively, and increases five- and three-year patent citations by 273% and 258%, respectively. Forced turnover has a generally insignificant effect on innovation performance, though.
Moreover, new CEOs from inside the firm are associated with higher levels of innovation performance than new CEOs from outside the firm."
I also like their discussion of how over confident CEOs invest more in R&D and hence get more results...this builds on similar findings in recent papers.
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