CEO`s education and investments in R&D

Abstract

The paper evaluates influence of CEO`s education and her experience on amounts invested in R&D in pharmaceutical industry. The sample consists of 270 pharmaceutical high-tech companies from S&P BMI index in 1999-2018 from 23 countries, both developed and emerging. The pharmaceutical industry is of particular interest since the projects there require specialized education to understand and manage the process. Therefore, the payback period of investments is long. As a result, in pharmaceuticals there is a high rate of intangible assets comparing to other sectors.

At the first glance, according to the results of regression analysis, business education, financial, managerial and economic education has no significant impact on investments. However, education in specific sphere, like physics, chemistry, biology, mathematics, has a significant positive impact on R&D expenses. We can see the similar effect for the CEO`s with two or more degrees in different fields. These results are in line with the findings of previous studies regarding CEO`s education.

At the next stage, educational level of CEO and its field are analyzed simultaneously. A degree obtained in the industry-specific field or a degree supplemented by a financial or managerial education has a positive impact on R&D expenses, while standalone financial degree, by contrast, has a negative effect.

So, we contribute to the academic literature with the idea that to get the unbiased results in similar studies we should account for not only degree but also the field. In practical sphere, the results can be useful for those who choose the educational track on their career path to CEO position as well as for HRs, Boards of directors, and other stakeholders while making decision on CEO turnover. Moreover, the results provide insights that could be useful for market analyst`s and investors` predictive models.