CEOs' Multicultural Experience, Firm Networks and Performance: Evidence from Firm-to-firm Transaction Data in Japan

Author Name ITO Tadashi (Gakushuin University) / NAKAMURA Ryohei (Faculty Fellow, RIETI)
Creation Date/NO. May 2019 19-E-037
Research Project Innovation Enhancing Regional Economic Structure and Evolution of Cities
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This paper postulates a hypothesis that the more diverse background a firm CEO has, the more extended firm-to-firm networks the firm constructs, which in turns leads to higher firm performance. Using the firm level data of firm CEOs' backgrounds and firm-to-firm networks, this paper corroborates the hypothesis by showing that firms whose CEOs are non-local-born are more likely to have more extended firm-to-firm transaction networks and consequently have better firm performance. Aside from this main finding, it also finds that the CEOs' graduated schools' level in terms of difficulty of entrance exams, which we consider as a proxy for CEOs' innate ability, has a strong positive nexus with the firm performance. The finding suggests an importance of human resource mobilization for growth.