Individualistic CEO and Corporate Innovation: Evidence from U.S. Frontier Culture

Abstract

This paper examines the relation between CEO’s individualistic cultural background and corporate innovation. Using hand-collected data on birthplaces of US-born CEOs, we provide robust evidence that CEOs born in frontier counties with a higher level of individualistic culture promote innovation performance. Firms led by such CEOs increase both quantity and quality of innovation outputs, measured by the number of patents, citation-weighted patents and the market value of patents. Besides innovation performance, we further show that CEO’s individualistic background causes a change in the innovation style, leading the firm to focus more on breakthrough innovation. Our extended analysis suggests that CEOs’ individualistic background promotes corporate innovation through building an innovation-orientated corporate culture and accumulating human capital by increasing the inflow of inventors.