Abstract
How CEOs with different characteristics act differently on R&D investment under the condition of financial constraints is an important but understudied question towards firms’ sustainable innovation. Employing the dataset from China-Enterprise Survey 2012 of the World Bank, this study tests the impact of financial constraints on firms’ R&D investment and the moderating role of CEO characteristics. Empirical results show that: (1) firm’s financial constraints have a significant restricting effect on their R&D investment; (2) internal financial constraints have no significant restricting effect on R&D investment for firms with female CEOs in comparison with firms with male CEOs, while the external financial constraints have a significant restricting effect on R&D investment for both groups. (3) CEO experience has a non-linear moderating effect on the relationship between financial constraints and a firm’s R&D investment. When the accumulated experience is overloaded, the positive moderating effect of CEO experience begins to decline and even become negative. Robustness tests further confirm these empirical findings. This study directly contributes to the literature of financing innovation and top management team’s impact on firms’ sustainable innovation, and generates insights on firms’ R&D management under the condition of financial constraints.
Highlights
Research and Development (R&D) investment through which knowledge is produced is the key to sustainable innovation and firm performance [1,2,3,4,5]
This study offers important theoretical enlightenment for a comprehensive and objective understanding of the R&D investment behaviors of firms’ top management team [32,42], especially CEOs with different characteristics when they are faced with financing constraints [19], and provides important policy basis for further optimizing financial policies and stimulating firms’ sustainable innovation
Employing the dataset from China-Enterprise Survey 2012 of the World Bank, this paper studies the impact of financial constraints on firms’ R&D investment and analyzes the moderating effect of CEO characteristics on the relationship between them
Summary
Research and Development (R&D) investment through which knowledge is produced is the key to sustainable innovation and firm performance [1,2,3,4,5]. Firms are often confronted with financing constraints at different degrees, which restrict their innovation activities, leading to the failure of innovation projects and restrain the firms’ innovation behavior [12,13]. Innovation scholars began to analyze and study financing issues related to innovation, especially the impact of financing constraints on firms’ innovation activities [6,12,14] on one hand, these studies have not obtained consistent conclusions yet. The effect of top management team, especially the characteristics of chief executive officer(CEO), on firms’ innovation activities under the condition of financial constraints remains to be further explored [10] (see Coles et al [15] as a review). How CEOs with different characteristics act differently on R&D investment under the condition of financial constraints is an important but understudied question towards sustainable innovation
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