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The implications of CEO power on the relationship between firm resources and innovation

Published online by Cambridge University Press:  09 January 2020

Fariss-Terry Mousa Open the ORCID record for Fariss-Terry Mousa [Opens in a new window] ,
Jaideep Chowdhury  and
Scott R. Gallagher
Fariss-Terry Mousa*
Affiliation:
Department of Management, College of Business, MSC 0205, James Madison University, Harrisonburg, VA 22807, USA
Jaideep Chowdhury
Affiliation:
Department of Finance and Business Law, College of Business, MSC 0203, James Madison University, Harrisonburg, VA 22807, USA
Scott R. Gallagher
Affiliation:
Department of Management, College of Business, MSC 0205, James Madison University, Harrisonburg, VA 22807, USA
*
*Corresponding author. Email: mousafx@jmu.edu
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Abstract

We examine the link between firm resources and firm innovation intensity, especially the drivers of innovation and organizational slack. We extend the organizational slack and innovation literature by examining its interplay with CEO power and industry level constraints on that power. We examine the influence of human resource slack, CEO power, and industry concentration on R&D intensity. Our study examines all publicly traded US firms over a 10-year period, giving us over 13,400 firm years to look at. Our results indicate that organizations with excess human capacity do on average show higher investments in R&D. However, we also find that in concentrated industries, where CEOs are less constrained by competitive pressure, powerful CEOs do interfere in this strategic choice and weaken the slack–innovation relationship. Even though CEO's in these situations may have sufficient slack resources, they appear inclined to reallocate such resources to purposes other than innovation.

Keywords

CEO powerinnovationexcess resourceshuman-resource slackindustry concentration
Type
Research Article
Information
Journal of Management & Organization , Volume 29 , Issue 1 , January 2023 , pp. 14 - 29
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2020

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