CEO turnover and innovation: Exploring the advisory role of inventor top management team members

Abstract

This study examines the impact of CEO turnover on ex post innovations of firms. Drawing upon upper echelons theory, we argue that unexpected and less-prepared CEO turnover (i.e., forced CEO turnover) reinforces the incoming CEOs' short-term orientations and cognitive limits in pursuing more ‘risky and uncertain’ R&D projects, thereby reducing ex post radical innovations of firms. We further highlight the advisory roles of TMT members in alleviating the deleterious consequences of forced CEO turnover on radical innovations. Our theoretical and empirical evidence demonstrates that the presence of TMT members with inventing experience stands to mitigate the negative relationship between forced CEO turnover and radical innovations. Additionally, we theorize and test whether this negative relationship is significantly weakened if inventor TMT members possess more power within each TMT, have more prior social interactions with their incoming CEOs, or have a more central position in the intrafirm inventor network. By doing so, we deepen our understanding of the underlying mechanisms and the collective roles of top executives in strategic decision-making toward post-CEO turnover innovation.