Abstract:

    Innovation is a high-risk professional investment activity. CEO is the "helmsman" in decision-making of innovation, but due to the limited rationality and risk aversion consciousness of the CEO, it is usually hard for them to control the risks in innovation activities. In practice, enterprises may employ technical independent directors to join the boards to assist and supervise the CEO′s innovation decision-making activities. With the growing popularity of academic research on the professional background of independent directors, the group of technical independent directors began to attract the attention of researchers. The research conclusions generally support the positive role of technical independent directors in improving enterprise innovation. Therefore, the research on the influencing factors of technical independent directors′ performance efficiency is gradually unfolding. The researchers have found that individual characteristics such as college background and gender, structural characteristics such as collaborative and interlocking, and occupational characteristics such as busyness can affect technical independent directors′ performance efficiency.

     The existing literatures had made a useful exploration on the influencing factors of the performance efficiency of technical independent directors from many perspectives. But quantity of them is still less than the literatures of independent directors with finance and other experts background, and few studies focus on the impact of social ties in corporate governance on technical independent directors′ performance efficiency. In practice, China′s formal institution does not prohibit the non-kinship relationship between independent directors and managers, the labor market of independent directors has not formed, and the selection process of independent directors can be influenced by the CEOs. The combination of those factors leads to the common phenomenon of the social ties between technical independent directors and CEO. Since the growing popularity of the concept of "social man" in the field of new economic sociology, the influence of senior managers′ social ties on the process of corporate governance cannot be ignored, especially in the emerging developing countries with imperfect formal institution. Therefore, it is of great significance to explore the influence of the social ties between technical independent directors and CEO on the performance efficiency of technical independent directors in China.

      Using the 2009-2018 China′s A-share listed companies in Shanghai and Shenzhen as research samples, based on the related theories of new economic sociology, social psychology, corporate governance, this paper explored the impact of the social ties between technical independent directors and CEO on corporate innovation. This paper manually collected the background data of executives through the reports of listed companies, Sina-Financial website, Baidu search engine, CNKI and other channels, and established the dummy variable of social ties by identify whether the technical independent directors and CEO have alumni-relationship or colleague-relationship. The result of regression analysis shows that such social ties had a negative impact on the performance efficiency of technical independent directors. Furthermore, in order to explore the mechanism to mitigate the negative impact of such social ties, this paper examine the situation affecting of it from the perspective of enterprise internal and external governance environment. Specifically, this paper used the network centrality of directors to construct the reputation variable of technical independent directors, used CEO duality to construct the CEO power variable, used Herfindahl index to construct the market competition variable, and used marketization of FanGang index to construct the law level variable. The result of grouping regression analysis shows that the negative effects of such social ties are more significant in the situation of high CEO power, low technical independent directors′ reputation, weak market competition and low level of rule of law. Finally, in order to verify the function channels of such ties, this paper uses the level of R&D manipulation to replace the supervision function of technical independent directors, and uses the level of R&D investment to replace the proposed function of technical independent directors. The result of intermediary effect test shows that such ties affect enterprise innovation by weakening the supervision function.

         The results indicate that the social ties between technical independent directors and CEO affect corporate innovation by restraining the supervisory role of the technical independent directors. But the restriction of such social ties can be relieved in the situation of high technical independent directors′ reputation, low CEO power, fierce competition in the industry and high degree of rule of law. According to the conclusions, this paper suggests that enterprises should establish effective corporate governance to balance the power of manages, the government should strive to promote the market-oriented process, strengthen the construction of the rule of law, and create a fair business environment. Through these channels to guide such social ties to play the role of promoting cooperation among individuals for pursuing public interests.

Key words: social tie, technical independent director, enterprise innovation