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Does board social capital influence chief executive officers' investment decisions in research and development?
Author(s) -
Chen HsiangLan,
Ho Mei HsiuChing,
Hsu WenTsung
Publication year - 2013
Publication title -
randd management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.253
H-Index - 102
eISSN - 1467-9310
pISSN - 0033-6807
DOI - 10.1111/radm.12025
Subject(s) - social capital , chief executive officer , business , investment (military) , coping (psychology) , officer , accounting , resource dependence theory , capital investment , finance , management , economics , political science , psychology , law , psychiatry , politics
The findings of the chief executive officer ( CEO ) characteristics–research and development ( R&D ) investment relationship remain incomplete if previous unexamined contingencies are not considered. Very few studies in this area have invariably focused on the constraints from the external environment and overlooked the important influence of board social capital on such relationship. This study uses insights from resource dependence theory to examine how the effects of CEO characteristics on R&D investment are contingent on board social capital. The results show that board social capital mitigates/enhances the negative/positive effect of CEO tenure/ CEO educational level on R&D investment, supporting the view that board social capital, as an important conduit to link firms to critical information and essential resources in the environment, may offer better counsel to CEO s and enhance their decision‐making capabilities in moving toward R&D . One important implication is that firms wishing to encourage innovation through R&D spending should consider nominating directors with rich social capital to the board because they may assist CEO s in coping with R&D complexities and acquiring requisite resources, leading to a better planning of R&D .