Phys.org September 5, 2023
A team of researchers in the US (George Mason University, St. John Fisher University) investigated the relationship between internal governance and firms’ innovation. They hypothesized that internal governance stemming from the difference in expected employment horizons between a CEO and the subordinate executives improves a firm’s innovation. Using the age difference between a CEO and their subordinate executives as the primary measure of internal governance, they found a strong positive relationship between internal governance and firms’ innovation output, and scientific and economic values. They showed that the positive relation was causal and the relationship between internal governance and innovation was more pronounced when external governance was weaker and when subordinate executives were expected to have more influence on the board. Cross-sectional analysis showed that internal governance spurs innovation in younger firms, and the likelihood of insider successions is higher… read more. TECHNICAL ARTICLEÂ