Executives’ Work out of Hometown and Corporate Innovation

Abstract

Innovation can improve enterprise performance and stock market returns, and influence merger and acquisition selection, so that enterprises can obtain collaborative innovation development. The cultural gene of executives is one of the important factors that affect the innovation activities of enterprises. With the increase of population flow, it is normal for executives to work out of hometown. The off-site environment may have an important impact on corporate behavior by shaping the behavior of executives. How does executives’ work out of hometown affect enterprise innovation and what mechanism does it work through? Through the literature review, we find that the change of entrepreneurs’ risk-taking level and the change of resource reserve are two possible mechanisms that affect innovation development. From the perspective of risk-taking, the better social trust level and legal environment in different places may prompt executives to work out of hometown, which may indicate their preference for risk, or they may choose enterprise decision-making of risk aversion due to the lack of social capital. From the perspective of resources, executives’ work out of hometown may focus on the accumulation of internal cash flow due to financing constraints and other issues, and may also use existing funds to obtain and maintain social capital. Facing the different impacts of different dimensions of risk and resources, this paper studies the impact of executives’ work out of hometown on enterprise innovation. The results show that executives’ work out of hometown can increase the implementation of enterprise innovation projects and the output level, and promote the improvement of enterprise innovation level. Through the intermediary mechanism test, it is found that, combined with the better social trust level and legal environment in different places, enterprises’ risk-taking level is increased, and the cash flow reserve level is improved, which jointly promotes the improvement of enterprise innovation level. It is further found that the promotion effect of executives’ work out of hometown on enterprise innovation will be further strengthened in the case of two job integration, lower separation of ownership and lower equity of the largest shareholder. The conclusion of this paper provides new evidence for investigating the economic consequences of population mobility, and also provides ideas for further exploring the cultural genes of enterprise innovation.