A new study from the University of East London suggests that companies led by long-serving chief executives may become less innovative over time unless strong independent boards balance their leadership.

The research examined 215 FTSE 350 companies over 11 years between 2010 and 2021. Researchers explored how CEO tenure and independent directors influence a company’s “R&D knowledge stock” — the expertise, research capability and technological strength built through sustained investment in innovation.

Published in the journal Corporate Governance, the study found that CEOs who remain in office for many years often become more cautious and less willing to support risky research and development projects. These firms were more likely to reduce investment in innovation and long-term technological growth. However, companies with higher numbers of independent directors were better able to maintain innovation capacity, combining experienced leadership with external challenge and oversight.

The study also found that both experienced CEOs and independent directors became more risk-averse when firms failed to meet performance expectations, suggesting that independent directors do not maintain stable risk preferences during periods of weaker corporate performance. The researchers argue that innovation is shaped not only by technology and finance, but also by leadership culture and corporate governance structures.

Lead author Igbekele Sunday Osinubi, of the Royal Docks School of Business and Law, said long-serving CEOs can bring valuable experience and stability, but may also become overly cautious or too attached to established ways of thinking. He said the findings show that independent directors play an important role in encouraging companies to continue investing in innovation, particularly during difficult periods when firms may otherwise retreat from long-term research and development.

He added that the implications extend beyond individual companies because innovation drives productivity, competitiveness and economic growth. The paper concludes that regulators and policymakers should consider governance reforms and incentives that encourage long-term innovation strategies, particularly in firms led by long-serving executives. The findings may also influence how boards approach CEO succession planning, oversight and the balance between short-term financial pressures and long-term investment.

More information: Igbekele Sunday Osinubi, Long CEO tenure, independent directors and R&D knowledge stock: the moderating effect of performance shortfalls, Corporate Governance. DOI: 10.1108/CG-03-2025-0173

Journal information: Corporate Governance Provided by University of East London