Are CEOs With a Ph.D. More Innovative?*

Prior empirical work finds no systematic relation between CEO education and firm performance, which leads to a puzzle as to why firms hire managers with higher educational attainment. This study investigates the link between corporate innovation and managerial talent, indicated by the highest degree achievable, a Ph.D. I find that firms managed by CEOs with Ph.D. degrees (Ph.D. CEOs) produce more patents with a higher number of citations and achieve greater innovation efficiency for a given amount of innovation spending. Further evidence supports the explanation that Ph.D. CEOs have superior innovation ability, and thus are better able to transform scientific knowledge into valuable intellectual properties. Moreover, the results are robust when I control for CEO innate talent and general skills accumulated during the work experience. Finally, risk-taking preferences or compensational incentives do not appear to explain the innovative behavior of Ph.D. CEOs.