CEO career horizon and innovation: A u-shaped tale of short-term profits and long-term legacy

In strategic‑leadership research, there is much interest in the influence of CEO's career horizon (CCH) on firm's resource investments and performance. While one line of CCH research, the traditional view, suggests that the shortening of CCH will reduce CEO risk-taking and firm's investments in radical innovation, intriguingly, a second emerging line of CCH research suggests the very opposite. The traditional view rests on the idea that CEO behavior is driven by the potential of personal gains through short-term profit optimization. Contrarily, the emerging view reflects the position that CEO behavior is driven by the potential of leaving long-term legacy by setting societal interests above personal ones. Reconciling these views, we theorize a U-shaped relationship between CCH and the pursuit of radical innovations, which recognizes that CEO motivations do not stay constant or fixed over their career trajectory. We also theorize two boundary conditions likely to attenuate this relationship: busyness of firm's board directors and firm's ownership by dedicated institutional investors. The study tests these ideas in the oil and gas industry, in which firms have opportunity to pursue radical innovations centering on renewable energies as well as incremental innovations centering on pollution reduction using traditional fossil fuels. Analysis of fifteen years of patent data for a panel of 105 firms shows support for our predictions. We discuss the study's contributions to research and practice, and its implications for policymaking to speed up transition to net-zero solutions.