This study examines how managers' political ranks–an institution-specific, non-monetary trait–shape firms' research and development (R&D) investment, and how this relationship is moderated by industry competition, regional institutional development and managers' career horizons.
Using a sample of Chinese state-owned manufacturing firms listed on the Shanghai and Shenzhen stock exchanges from 2009 to 2020, this study tests its hypotheses through multiple regression analysis.
Lower-ranking managers are motivated to pursue high-risk R&D projects as a means of career advancement within the political hierarchy, whereas higher-ranking managers exhibit risk aversion to protect their current positions. Moreover, stronger regional institutional development mitigates the negative impact of political rank on R&D investment, while a shorter career horizon exacerbates this negative effect.
This study highlights the importance of aligning managerial tournament incentives with corporate innovation strategies. It also offers valuable insights for policymakers in emerging markets such as China to formulate more effective managerial incentive schemes.
This study is the first to investigate how CEOs' political ranks shape corporate R&D investment, offering novel insights into the role of institution-specific, non-financial incentives in driving R&D decision-making.
