Does director interlock impact corporate R&D investment?

摘要

This paper investigates the effect of director interlock on corporate research & development (R&D) investment from the perspective of inter-organizational imitation. We argue that managers will imitate the R&D investment intensity of their interlocked-firms when deciding how much to spend in R&D for their own firm. Following prior literature, we further argue that under different types of interlocking director and industry characteristics, the impact of director interlock on corporate R&D spending is different. Using a sample of public firms listed in Chinese Shanghai and Shenzhen Stock Exchanges, our empirical results show that managers imitate the prior R&D investment intensity of their interlock partners, and the impact of director interlock on corporate R&D intensity is stronger when the interlocking director is an inside director in the focal firm or when the focal firm and interlock firm belong to the same industry. Our results still hold when we account for the potential sample selection bias, firm similarity, and the confounding factors that can contribute through unobserved industry characteristics.