Marketing Faculty Publications and Presentations
Document Type
Article
Publication Date
2024
Abstract
Based on a sample of firms in the S&P 1500 index covering the years 1993 to 2016, we find that firms with Republican CEOs spend less on R&D compared to their Democratic counterparts. However, Republican CEOs ratchet up their R&D spending when a Republican is in the Oval Office. Furthermore, we find that R&D spending is negatively related to return on assets (ROA), which is indicative of the risky nature of R&D spending, but R&D is positively related to Tobin Q, a longer-term performance measure. As a consequence, when Republican CEOs manage under a Republican president, the effect of accelerated R&D spending is to send ROA lower, owing to the short-term negative effect of R&D spending. Additionally, due to overspending on R&D by Republican CEOs under a Republican president, the generally positive effect of R&D on Tobin Q is weakened. It seems social capital has its dark side as it can mislead CEOs to make opportunistic but unwise R&D spending decisions. Overall, Republican CEOs, relative to Democratic CEOs, have higher short-term performance (ROA), and lower long-term performance (Tobin Q) owing to reduced R&D spending. Our results have research, managerial, and policy implications.
Recommended Citation
Guo, C., Hossain, M.N., Kroll, M.J., Elnahas, A. and Ater, B. (2024), The impact of Republican CEO ideology and political alignment on R&D spending and business performance. R&D Management. https://doi.org/10.1111/radm.12664
Publication Title
R&D Management
DOI
10.1111/radm.12664
Comments
Read the published version freely: https://onlinelibrary.wiley.com/share/JVECHDEVIDF3UDXDWRDD?target=10.1111/radm.12664