IS FIRM INNOVATION ASSOCIATED WITH CORPORATE GOVERNANCE?

Abstract

U.S. Corporations spend millions of dollars on innovating new technologies. This despite the fact that such capital expenditure outlay runs the risk of possible failure and loss of investments. This paper investigates what factors drive a corporation to innovate. In addition to firm-specific factors, we examine board governance and industry concentration. This study examines the association of firm, governance and industry characteristics that may influence a firm to innovate. Results from logit regression seem to suggest that firm size, capital expenditure growth, and industry concentration are more likely to influence firm’s innovation efforts. Estimates also indicate that younger CEOs are more prone to innovation than older CEOs. These findings stand up to greater scrutiny when we perform a battery of robustness checks.