۱- Introduction

۲- Hypotheses development

۳- Research design

۴- Empirical analyses

۵- Endogeneity

۶- Further analyses

۷- Conclusions

References

Abstract

This study examines the impact of managerial foreign experience on corporate innovation using manually collected data of Chinese listed companies. We find that managerial foreign experience is positively associated with corporate innovation. This association is robust to a series of robustness checks, including the use of Heckman two-step sample selection model, propensity score matching procedure, and the market reaction to the appointing announcements of managers with foreign experience. Further analyses indicate that senior managers with foreign experience have a more significant impact on corporate innovation than junior managers with foreign experience; both foreign study experience and foreign work experience have important impacts on corporate innovation; managers with foreign experience in private enterprises have more initiatives to innovate than in state-owned enterprises; and managers who gain foreign experience in the United States tend to be more influential and innovative than those who have foreign experience from other countries or regions. Overall, our results suggest that managerial foreign experience matters for corporate innovation in emerging markets.

Introduction

It is widely acknowledged that innovation has become an important corporate strategy for a company to achieve and sustain competitive advantage (e.g., Nelson and Winter, 1985; Baer, 2012). Due to the importance of innovation for a firm’s competitiveness, a number of studies have explored firm characteristics that stimulate this corporate behavior (e.g., Bhattacharya and Ritter, 1980; Waegenaere et al., 2012; Aghion et al., 2013; Chava et al., 2013; He and Tian, 2013; Bernstein, 2015; Cornaggia et al., 2015; ). Recently, financial economists have focused on the impact of certain managerial characteristics on corporate innovation. These characteristics include managerial ability (Chen et al., 2015), managerial incentives (Lin et al., 2011), CEO overconfidence (Hirshleifer et al., 2012), CEO turnover (Bereskin and Hsu, 2014), and CEO’s general skills (Custódio et al., 2017). However, no existing studies have systematically examined whether managerial foreign experience can promote corporate innovation. We fill this void by examining the impact of managerial foreign experience on corporate innovation in an emerging market, China. In China, managerial foreign experience is an important and rare characteristic for corporate managers. Although China has undergone rapid economic development since the 1970s, it is still an emerging economy with weak legal institutions, weak investor protection, and less developed labor markets.