Does CEO popularity affect firm innovation? Evidence from the developing country

Abstract

The purpose of this study is to provide empirical evidence from Indonesia of the influence of CEO popularity on firm innovation. This study draws on the upper echelons theory to investigate whether CEO popularity affects firm innovation. Upper echelons theory is the idea that top executives view their situations through their own highly personalized lenses (Hambrick & Mason, 1984). We argue that popularity may be positively or negatively related to firm innovation. The approach used in this research is quantitative. To examine the relationship between CEO popularity and firm innovation, this study employs a logistic regression on 378 firm-years observations during 2014–2017 period of Indonesian listed firms. The result of this study shows that CEO popularity is positively related to firm innovation. Our result is robust after mitigating the concern about endogeneity and self-selection bias. Further, we find that the positive relationship between CEO popularity and innovation is more pronounced for firms with a lower level of board independence. Our findings highlight the importance of CEO characteristics on firm behaviour.