Abstrait

CEO’s social embeddedness and R&D strategy of entrepreneurial firms

Hongping Zhang, Hui Zhao, Xuan Wang

Drawing from the strategic leadership and social capital perspective, the paper examines how CEO’s social embeddedness determines the R&D strategy of entrepreneurial firms in China. We discuss in detail one unique aspect of social embeddedness of CEOs in China—political networking—that have evolved from the country’s unique social and historical context. We argue that entrepreneurial firms with CEOs that have resorted to the most traditional way of social support—political networking—would choose the R&D strategy that can help them maintain and enhance the support from the political networks and can enable them to take full advantage of such networks. As a result, they tend to pursue exploitative R&D, which incur lower risks and yield quicker return than exploratory R&D. This will benefit and please the parties in the political network, who in turn will provide further support. We further argue that in China the CEO’s decision is likely to be challenged when the board is more powerful, a powerful board will strengthen the relationship between CEO’s political networking and the R&D strategy.