CEO Individualism and Corporate Innovation

Abstract

Using data on birthplaces of 2,065 CEOs and a local measure of cultural individualism based on the pace of westward expansion in American history, I find a robust positive relation between CEO cultural individualism and corporate innovation. Firms with more individualistic CEOs file more patents, have more patent citations and greater patent originality, and generate patents with higher market value. I obtain these results using panel OLS regressions and the difference-in-differences estimation around CEO turnovers. CEO individualism increases innovation through its effect on corporate culture, internal capital reallocation, and the type of M&A deals pursued by the firm.