The Role of CEO Ability in Determining R&D Investment Behavior among High Technology Firms in Korea

Abstract

This study examines whether and how R&D management in high technology firms differs from that in non-high technology firms in Korea. More importantly, given that CEOs are responsible for R&D investment decision-making, we investigate whether more competent CEOs at high technology firms engage in different R&D management than those less competent. Using the cost stickiness model developed by Anderson et al. (2003), we find that high technology firms exhibit stickier behavior with respect to R&D costs compared to non-high technology firms, indicating that high technology firms are less likely to reduce R&D investment in declining-sales periods. We also find that R&D cost stickiness in high technology firms appears only when the firms are managed by more competent CEOs. This indicates that CEO ability is one of the most important factors explaining R&D management decisions in high technology firms.