New Dogs New Tricks: CEO Turnover, CEO-Related Factors, and Innovation Performance

This paper examines how CEO turnover and CEO-related factors influence innovation. We find that CEO turnover is associated with a significantly greater quantity and quality of future innovation, measured with the number of patents, citations, patents per research and development dollar, and citations per patent in the subsequent three-year and five-year periods. New internal CEOs are associated with more and better innovation than new external CEOs. We also find that innovation quantity and quality are positively associated with CEO overconfidence, option compensation, and information asymmetries. These empirical results are robust to controlling for potential endogeneity issues and also remain in a sample of firms that experience the sudden deaths of their CEOs, confirming the critical role of CEOs in innovation performance.