CEOs’ Functional Experience,TMT’s Political Backgrouds And Corporate Innovation

Innovation is critical to the long-term growth of a company.As the competition between domestic and foreign enterprises intensifies,China’s market competition will also change from price and resource-oriented to technology and application-oriented.The degree of market competition will become more intense.To thrive in the rapidly changing economic environment and increasingly fierce competition,we must adhere to corporate innovation.An extensive literature examines the determinants of corporate innovation.The existing literature on the factors influencing firm innovation mainly follows the research context from macro(policy,subsidies,political backgrounds)to micro(firm size,ownership structure)and from external(government,market)to internal(firms,managers).Of these,most of the research literature on managers focuses on CEO characteristics and corporate innovation.Existing studies on CEOs cover characteristics such as pay incentives,overconfidence,age,education,gender,military background,tenure,and functional background.The few studies that consider functional background tend to consider one aspect of functional experience or manually collect data on the functional experience of some CEOs,making it difficult to automate the collection of comprehensive functional experience over the course of a CEO’s career.Although academics have recognized the comprehensive advantages of CEO career richness,it is difficult to accurately define and measure the career experience of the executive team of a public company by quantitative means due to the large number of individuals in the executive team.Meanwhile,existing studies exploring the relationship between executive background and corporate innovation have vaguely defined executives,and the research framework is limited to individuals or entire teams,without considering the reasonable configuration of individual leaders and leadership teams,ignoring the attributes of the TMT(executive team without the CEO)involved in corporate innovation.As a core team,the TMT has the most disposable resources,such as political background,which may affect the access to other resources.Due to the uncertainty of corporate innovation,the CEO needs to integrate the knowledge in the TMT team,align information and opinions,and translate them into positive innovation performance.Therefore,whether the richness of the CEO’s functional experience is an essential determinant of corporate innovation and whether the TMT influences the relationship are unclear.This study develops a theoretical framework to explain how the effect of a CEO’s functional experience richness influences corporate innovation.With upper echelons theory,we proposed the hypothesis of a positive relationship between a CEO’s functional experience richness and corporate innovation.The relationship between internal and external governance mechanisms and innovation enriches corporate innovation’s impact paths.Finally,given the different contexts of firms at different development stages,this paper explores the dynamic characteristics of CEO functional richness affecting corporate innovation at different development stages.Finally,the heterogeneous research hypotheses are proposed and justified under two segmentation frameworks: firm attributes(growth and maturity)and industry attributes(digital and non-digital economy industries).We ran a fixed effects model on a sample of 185 non-state-owned listed companies(non-SOEs)in China using executives’ curricula vitae(CVs),company patents,corporate governance,and financial indicators.Our results support the hypothesized positive relationship between a CEO’s functional experience richness and corporate innovation.Furthermore,after taking into account information processing,risk-taking,and market competition,we theorized and found support for the moderating effects of a TMT’s political background.Specifically,the relationship between the CEO’s functional experience richness and corporate innovation is strengthened by the TMT’s political background.Finally,this paper verifies the hypotheses of this paper by heterogeneity analysis and empirical analysis of corporate innovation at different stages.For the firm life cycle,this paper validates the relationship between CEO functional richness,TMT political context,and firm innovation using both growth and maturity samples.The regression results show that the effect of CEO functional richness on corporate innovation is significantly present in both the growth and maturity periods.Meanwhile,the moderating effect of TMT political context on the relationship between CEO functional richness and firm innovation is significantly present in both the growth and maturity periods.For the digital economy and non-digital economy industries,this study compares the effect of CEO functional richness on firm innovation significantly in both digital and non-digital economy industries.The coefficient test further demonstrates that the positive relationship between CEO functional richness and firm innovation is stronger in non-digital economy industries compared to digital economy industries.Meanwhile,the moderating effect of the political context of TMT on the relationship between CEO functional richness and firm innovation is significantly present in both digital economy industries and non-digital economy industries.These results provide important insights for policymakers and for our understanding of emerging technological capabilities.This paper explores the factors that influence corporate innovation activities and provides a basis for an innovation-driven development strategy in China.This paper explains what kind of leaders are more suitable for companies.It provides a reference for Chinese listed companies to select and hire executives.The impact of corporate innovation varies with the level of national economic development and economic cycles.Therefore,this paper provides policy ideas for companies to enhance corporate innovation at a micro level through heterogeneity analysis.Firms need to rationalize the organizational structure of CEOs and TMTs and make timely and dynamic adjustments with the firm’s life cycle and the economic system.