Abstract: In the great wave of China’s reform and opening-up, a large number of college faculty and researchers in scientific research institutions left their in-system occupations and devoted themselves to the commercial tide, a phenomenon well known as “wenren xiahai” (Dickson，2007; Zhou et al., 2017). It is a unique phenomenon in the development of China’s economic reform that has rarely occurred in western countries such as the United States and the United Kingdom. It should be noted that in recent years, increasing amount of researchers with academic experience have entered the management of listed firms and even held top level positions like Chief executive officer. According to statistics in our sample, CEOs with academic experience account for 13.5% on average during the sample period, and the percentage shows a steady growth trend year by year, from 9.1% in 2007 to 13.6% in 2010, then up to around 15% since 2011. As the number of scholar-type CEOs is growing rapidly in top management teams, what roles do they play in the firms’ innovation decision-making? Does CEO’s academic experience hinder or enhance innovation? What is the mechanism? These questions remain unexplored in the previous literature.Theoretically, the effect of CEO’s academic experience on firm innovation is uncertain. On one hand, CEO’s academic experience may impede firm innovation. Due to prolonged academic training, CEOs with academic experience tend to be more rigorous and risk-averse in their decision-making, and are relatively more focused on independent thinking (Jiang and Murphy, 2007). As innovative activities involve a high probability of failure and the innovation process is unpredictable and idiosyncratic with many contingencies that are impossible to foresee, the listed firms headed by CEOs with academic experience may have lower innovation outputs. On the other hand, the essence of academic research is exploration and innovation (Beveridge, 2017). Long-term academic edification may endow academic CEOs with inherent creative spirit and innovative willingness, thus enhance firm innovation. Therefore, the relationship between CEO’s academic experience and firm innovation is an empirical question to be tested.Based on statistics on Shanghai Exchange and Shenzhen Exchange listed firms in China between 2007 and 2014，this paper examines the effect of CEO’s academic experience on firm innovation and discusses the underlying mechanisms. Using a firm fixed-effect regression model, we document a positive relation between CEO’s academic experience and innovation output (measured by invention patents in two years ahead). More specifically, we find that CEO’s academic experience increases firm innovation by about 10%. Although evidence stated above supports our hypothesis, an important concern is that the relation between CEO’s academic experience and firm innovation could be endogenously determined. To establish causality, we employ two identification tests, including Heckman two-stage regressions and propensity score matching (PSM) approach to address endogeneity concerns. Besides, we conduct several robustness tests and our results hold. Moreover, we find that the positive association between CEO’s academic experience and firm innovation is more pronounced when the CEO is more powerful or promoted within the firm. We further investigate the underlying mechanisms and find that firms with overseas or high-level academic experience CEOs are more innovative; meanwhile firms with academic experience CEOs are more likely to implement industry-university-research cooperation strategy to promote firm innovation. Overall, the evidence is consistent with our “creative spirit shaping hypothesis”. In addition, we find that the promotion effect of CEO’s academic experience on firm innovation mainly comes from natural science research experience, while political connection weakens the positive association between CEO’s academic experience and firm innovation.This paper contributes to the existing literature in several ways. First, we contribute to the stream of research that examines the motivations and determinants of firm innovation. The large proportion of CEOs with academic experience in top management teams is an important and unique phenomenon which originates from “wenren xiahai” wave during China’s reform and opening-up. To the best of our knowledge, this paper is the first in the literature to provide causal evidence that CEO’s academic experience affects firm innovation. We provide supportive evidence that CEO’s academic experience enhances firm innovation and shed light on the creative spirit shaping function of academic experience. Second, our study extends prior research that examines the effect of managerial attributes on firm decision-making. Prior literature focus primarily on the links between managerial heterogeneity, including managers’ age, gender, education background, personality characteristics, financial experience, industry expertise experience, poverty experience, military experience, politics experience and firm behaviors. But less is known about the economic consequences of CEO’s academic experience. Unlike previous studies, we provide new evidence on how CEO’s academic experience affects listed firms’ high-risk innovation activities and explore the underlying mechanisms in the context of scholar-type CEOs phenomenon in top management teams. This study not only contributes to literature on firm innovation and Upper Echelons Theory, but also has significant implications for listed firms to make better CEO appointment decisions to enhance firm innovation. Prior studies pointed out that innovation activities involve the exploration of new untested approaches that are likely to fail, so standard pay-for-performance schemes that punish failures with low rewards and termination may in fact have adverse effects on innovation (Ederer and Manso, 2013). This study goes further and shows that the CEO’s inherent creative spirit and innovative willingness are more efficient in the process of innovation decision-making. Therefore, it is more important for listed firms to explore and cultivate the CEO’s inherent creative spirit and innovative willingness than depending on inefficient external incentives, so as to improve listed firms’ innovation outputs and core competitiveness.

Key words: academic experience, firm innovation, creative spirit