CEOs’ Resource-Scarcity Experience and Firm Innovation

Abstract

This study examines how CEOs’ resource-scarcity experience affects resource allocation toward innovation. Drawing on imprinting theory, we theorize that CEOs with resource-scarcity experience in childhood develop cognitive frames characterized by uncertainty aversion and short-term orientation, which decrease resource allocation toward innovation activities and further negatively affect innovation performance. We examine our rationale in the context of the Great Famine in China. Results show that (1) CEOs’ resource-scarcity experience in childhood negatively affect resource allocation toward innovation. More specifically, these CEOs tend to allocate less financial capital (i.e., R&D expenditure) and human capital (i.e., recruiting fewer top managers with R&D background or with academic experience). (2) CEOs’ resource-scarcity experience has a negative indirect effect on innovation performance via resource allocation, indicating that such patterns of resource allocation finally influence innovation performance. (3) the moderating effect of organizational slack on the indirect relationship is not significant, indicating that the imprinting effect on CEOs’ resource-scarcity experience cannot be weakened even if CEOs currently control abundant organizational resources. We contribute to the innovation and imprinting literature by demonstrating how resource-scarcity experience imprints on managerial strategic choices of innovation.