The influence of CEO power on explorative and exploitative organizational innovation

Abstract Despite the growing research evidence on the effect of powerful CEOs on organizational outcomes, their role in shaping the firm's innovation agenda has received little scholarly attention. This study examines the effect of CEO power on exploratory and exploitative innovation. Drawing from core arguments of Behavioral Agency Theory, this study proposes that firms led by powerful CEOs are likely to pursue more exploratory and less exploitative innovations. Furthermore, these relationships are significantly strengthened by CEO Outsider Status. Using data from 150 U.S. firms, the results reveal a significant positive relationship between CEO power and explorative innovation. Contrary to predictions, firms led by powerful CEOs engage in more not less exploitative innovation when the CEO is appointed from outside the firm. Overall, the findings provide a more nuanced explanation of the link between CEO power and organizational innovation. Implications for research and practice are discussed.