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This paper examines whether old directors improve or impede corporate innovation performance. We use sudden deaths and retirements of old directors as exogenous shocks, and show that compared to controlled firms, the innovation performance of treated firms declines after old directors leave their firms, implying that old directors positively influence innovation performance. We also find that the positive effect of old directors on innovation performance stems from their more relaxed monitoring and tolerance for failures. For details, we find that old directors are beneficial to innovation in firms with less monitoring and less competition.
JEL classification: G34; O32.
Keywords: Innovation; Patent; Board of Directors.