Do returnee executives influence firms' relative exploratory innovation focus? The moderating role of economic policy uncertainty

PurposeBased on upper echelon theory and signaling theory, we aim to examine the impact of returnee executives on firms' relative exploratory innovation focus and the moderating effect of economic policy uncertainty on this relationship.Design/methodology/approachUsing panel data of Chinese listed companies from 2009 to 2020, we obtained empirical evidence to support our arguments.FindingsReturnee executives positively influence firms' relative exploratory innovation focus. This means that firms with returnee executives will shift the focus of their innovation activities toward exploratory innovation more than exploitative innovation. In addition, we find that economic policy uncertainty strengthens this relationship.Originality/valueFirst, by showing how returnee executives positively influence firms' shift in focus to exploratory rather than exploitative innovation, we expand our understanding of firms' trade-offs between exploratory and exploitative innovation. Second, this study examines how returnee executives influence the relative importance that firms place on exploratory and exploitative innovation, allowing us to build a realistic and nuanced view of how returnee executives influence firms' strategic choices. Finally, this study expands the strategic leadership literature and responds directly to the call for studies focusing on how institutional environmental conditions and executive characteristics work together to shape firm outcomes.