External parachuting and innovation investment: mediating effect of entrepreneurial spirit

Innovation is a source of power for economic development and a magic weapon enabling enterprises to develop and grow through market competition. Innovation is of great theoretical and practical significance when studying the relationship between talent selection and enterprise innovation investments and can provide a reference for the current innovation-driven development strategy in China. This study is guided by the question of how external parachuting affects innovation investments. To understand the implications of external parachuting for innovation investments, we use Hambrick and Mason’s upper echelons theory and development and hypothesize a positive relationship between external parachuting and innovation investments. To investigate our hypotheses, based on the panel data of A-share listed companies in Shanghai and Shenzhen from 2007 to 2021, we empirically examine the impact of external parachuted executives on the innovation investments of enterprises and the mechanism based on entrepreneurial spirit. The empirical results reveal that external parachuted executives have a significant and positive effect on enterprise innovation investments. Moreover, there are four intermediary channels for this effect: promoting the formation of entrepreneurship, inhibiting entrepreneurs’ financial asset holdings, reducing agency costs and increasing environmental uncertainty. Our findings highlight the important role of the concept of talent selection and the entrepreneurial spirit in innovation investments. We derive implications for research and practice.