CEO Age and Firm Innovation: Evidence from IT Industry in Korea

Abstract

This paper investigates the relationship between CEO age and firm innovation measured as innovation productivity (i.e., the number of patent applications) and innovation scope (i.e., technological proximity). Using a sample of 11,194 firm-year observations from the Korean stock markets for the sample period of 2002−2016, we document that a firm’s innovation productivity or innovation scope decreases in CEO age. We also report that younger CEOs in IT firms are more likely to participate in firm innovation than those in non-IT firms. Our main results are robust in Tobit, Poisson, and negative binomial regressions, in specification of CEO-fixed effect models, and in estimating new sample constructed by a propensity score matching. Taken together, younger CEOs in IT firms may be more motivated to signal their innovativeness to the market to be regarded as outstanding innovators or adventurous innovators, which supports managerial signaling hypothesis for young CEOs.