Artificial Intelligence, CEO Turnover, and Exploration Orientation in Firm Innovation

This study examines the role of artificial intelligence (AI) in facilitating corporate innovation following a CEO turnover event. Using patent and job posting data, we find that firms with greater AI investment, as measured in the hiring of employees with AI skills, are more successful in explorative innovation after CEO turnover events. Further analyses show that this effect is likely because of the firms with AI investment being better positioned to enable strategic change in innovation by (a) improving resource allocation to research and development investment, (b) prioritizing innovation as a central element of the firm’s strategic vision, and (c) driving the operational implementation of innovation through new initiatives. Importantly, AI enables strategic change in part by mitigating myopic management and overcoming information overload that new CEOs often encounter. Overall, this study highlights the strategic value of AI in promoting exploration in innovation during organizational transition periods, offering insights into leveraging AI for transformation and creativity when navigating dynamic environments.

History: This paper has been accepted for the Information Systems Research Special Issue on Analytical Creativity. Ram Gopal, Ulrike Schultze, Min Ding, and D. J. Wu, special issue editors.

Funding: The authors acknowledge generous research support from the Mack Institute Research Fellowship and Analytics at Wharton.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2024.0970.