The Influence Of CEO Tenure On Corporate R&D Intensity

Innovation is the driving force of economy Growth. Leading technology could improve enterprises’productivity, create competitive advantages, and finally boost the market share. Half a century ago, Joseph Schumpeter, father of the modern innovation theory, had already pointed out that the development of technology and reform of production mode were engines of economy rowth for capitalist economy. Since the theory was established, it had withstood the test of time, and been testified by the data of different region in different era.Innovation has become the core competency of the modern enterprises, while the externality of technology would benefit the related industry and ignite the vitality of the whole economy. Entrepreneurs had even been reckoned as the leader of innovation by Schumpeter in his book "the theory of economy Growth". Indeed, with the increasing significant role corporate sector played in technology innovation, those business runners really matter a lot in technology progress of a country.R&D activities have always been the hot topic discussed academically. This paper is trying to analyze the effect of CEO tenure, turnover on corporate R&D intensity. With the support of basic theories such as motivation, agency-principal, and upper echelon, the logical train of thought is arranged as follow:When a CEO starting to take charge of an organization, he/she would be hesitate to launch a reform or change the current operation route immediately. For one thing, he could not handle the management turmoil arising from organization reform. For another thing, there would not be enough support from incumbent board of directors and general managers. However, his management experience and control power over the company are increasing as time goes by. After his material needs were fulfilled by affluent remuneration, he would consider increasing the long-term wealth of stockholders, which in turn, could boost his reputation in the manager market, and self-fulfillment of his career. For managers with longer tenure, investing for long-term value also benefit them a lot. Those wise decisions they made would attract the support of proprietors and prolong their tenure. While long management tenure would encourage CEOs to make long-term investment, management shift may drive the outgoing top manage to make some myopic decisions. Just as Dechow, Sloan (1991) stated, outgoing CEO’s decision perspective was much shorter than ever. They tend to boost the recent reported profit through earnings management in order to get a fat payment and glamorous reputation in some unethical but legal measures. Expenses such as R&D and advertisement may be cut though such decisions are irrational. According to the analysis above, this main structure of this paper will be presented below:The first chapter is introduction. In this part, the writer will introduce the back ground, significance of this research, the creativity, and defect of the paper.The second chapter is designated for literature review. This chapter is to review and comment on the previous achievements in is R&D research.The third chapter is theory analysis and hypotheses developing. After analyzed the basic theories of this research, the writer will make a state about how the ideas were developed, and why the three hypotheses are reasonable theoretically.The forth chapter mainly discussed the design of the research, including the source of sample data, the model used to testify the three hypotheses.The fifth chapter is about the results of regression and analysis of those results. Description statistics and OLS are measures used to test the hypotheses, while interpretations of the above result are attached just under those statistical tables.The sixth and last chapter is about to concluded the whole research and point out the possible fields of research in corporate R&D activities in future.The data about R&D expense, CEO Tenure comes from financial statements of listed companies in china, while other relative data was found in CSMAR database.According to the result of the paper, there are four interesting findings:With the extending of CEO tenure, the R&D intensity of the company will grow, while the CEO tends to decrease investment in R&D activities when he is going to resign from the current position; In companies with lower R&D intensity, the latter phenomenon described above was much significant than that of high R&D intensity. Entitling the CEO with stock incentives is a plausible measure to curb the myopia conduct of outgoing CEO.There are two main contributions of this paper. For one, it revaluated the relationship between management tenure and corporate R&D intensity with regard to the back ground of management incentives. In addition, it offered a creative research perspective in this field---to separate the current sample companies and re-estimate the model, which may provide distinct result comparing to the result of whole sample.Anyway, a research could not be as perfect as what expected in advance, letting along this paper is finished by someone just with a master’s degree. There are three defect of this research. To begin with, the object of this research is so confined---just including CEOs---that the universality of the research would be seriously questioned. What’s more, the representation of the sample selected in this paper would also be doubted. There are just161companies being enrolled. However, whether this sample could represent the whole companies listed in the stock market is unknown. Finally, the data of companies listed in the GEM (Growth Enterprises Market) of Shenzhen stock market is omitted in the data sample which would possibly induce a bias of sample selection.