The implications of CEO power on the relationship between firm resources and innovation

Abstract We examine the link between firm resources and firm innovation intensity, especially the drivers of innovation and organizational slack. We extend the organizational slack and innovation literature by examining its interplay with CEO power and industry level constraints on that power. We examine the influence of human resource slack, CEO power, and industry concentration on R&D intensity. Our study examines all publicly traded US firms over a 10-year period, giving us over 13,400 firm years to look at. Our results indicate that organizations with excess human capacity do on average show higher investments in R&D. However, we also find that in concentrated industries, where CEOs are less constrained by competitive pressure, powerful CEOs do interfere in this strategic choice and weaken the slack–innovation relationship. Even though CEO's in these situations may have sufficient slack resources, they appear inclined to reallocate such resources to purposes other than innovation.