Returned technology executives and enterprise innovation

Abstract

Abstract:

Technological innovation is an essential driver of one nation′s economic growth and one of the fatal elements for achieving sustainable economic development. China is trying to transform its economic growth model from an export-driven economy to an innovation-driven one since the strategy of copying, relying on, and following developed countries′ models is no longer suitable for the current market environment. Only innovation can enhance its core competitiveness. One nation′s independent innovation centers on enterprise innovation. Meanwhile, enterprise innovation mainly depends on talents. In China, experiences of studying or working overseas are a specific form of human capital. It is a sign of having a good educational background or professional knowledge and skills.

Entrepreneurs and senior management teams of enterprises play leading roles in innovation. Having the willingness to innovate is not enough to be successful in innovation, however. It is also necessary to have innovative minds and the abilities to combine all drivers of innovation. To coordinate production, education, and research is one of the essential abilities. Returned technology executives (RTE) are senior management team members of enterprises who have experience studying or working outside China. They usually experienced research and development experience (R&D), production, or design in foreign institutes. Many listed enterprises favor them because they may have innovation abilities. Existing literature has examined the influencing factors of corporate innovation from multiple perspectives. Those factors include, for example, corporate governance, financing constraints, core employee equity incentives, the gender of executives, alumni relationship network of executives, and inventor experience of executives. No authors have studied the relationship between RTE and enterprise innovation, however.

We hypothesize the relationship between RTE and enterprise innovation as follows. Firstly, based on the Upper Echelons Theory, we describe the influence of RTE on enterprise innovation. Secondly, we analyze the difference between the RTE′ roles in the innovation of state-owned and non-state-owned enterprises. Lastly, we use the patent data of high-tech companies listed in the Shanghai Stock Exchange from 2008 to 2016 to test the relationship between RTE and enterprise innovation rigorously.

The empirical results show that returnee technical executives have a significant and positive effect on enterprise innovation. Meanwhile, RTE have more vital roles in promoting the enterprises′ breakthrough innovation than incremental innovation. Moreover, the empirical results are steady when ruling in the endogenous effect and self-selection effect. We also find that a positive effect of RTE on the innovation of the state-owned enterprises is more significant than that of non- state-owned enterprises when regrouping the data through property rights. Lastly, the research on the internal mechanism shows that RTE can improve the level of management diversification by their professional knowledge to promote enterprise innovation, which can decrease the management short-eyesight behavior.

The paper has two contributions. Firstly, it contributes to the literature by incorporating RTE′s professional background in R&D, production or design, and enterprises′ property right data to investigate RTE′ impact on corporate innovation. The existing literature is short of such analyses. The contribution will expand the research content and perspectives of corporate executives and innovation and deepen the theoretical knowledge in the RTE′ innovation effect. Secondly, the paper crystallizes the mechanism of the role of RTE in enterprise innovation and provides new empirical evidence for the state, local governments, and enterprises. The evidence will help policymakers improve innovation incentive mechanisms and the institutional environment and optimize the corporate governance mechanism. The paper also offers policy recommendations to ensure that RTE can bring in the positive effect of enterprise innovation and shed light on the good uses of RTE for governments and enterprises.

Key words: returned technology executives, enterprises innovation, property rights, management short-eyesight

Zhang Zhengyong, Hu Yanyan. Returned technology executives and enterprise innovation[J]. Science Research Management, 2021, 42(2): 171-180.

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