DOES CEO PROMOTE INNOVATION in SMEs? A COMPARISON between INTERNAL and EXTERNAL CEO

Internal and external hired CEOs could differently affect company investment behaviour and capability to encourage strategic changes and entrepreneurship, such as innovation activity. Based on a sample of 13,749 European manufacturing SMEs, the paper shows that CEO has a significant effect on the innovative activities in SMEs. However, this effect is negative in case the CEO is appointed from the external of the company, while the effect becomes positive in case of internal CEO. These findings remark that external CEO may lack firm-specific knowledge to manage the innovation process and experience with firms' available resources and innovation capabilities