TMT Openness and Corporate Innovation: Personality Measurement Using an LLM

According to upper echelons theory, top management team (TMT) characteristics significantly influence corporate strategic decision-making. This study examines the impact of TMT openness on corporate innovation using a sample of Chinese A-share listed firms from 2007 to 2022. We employ a large language model (GLM-4) to measure TMT personality traits based on Q&A transcripts from annual performance briefings, offering a novel approach to capturing managerial personalities. Our findings demonstrate that TMT openness significantly enhances both explorative and exploitative innovation. Moreover, our extended analysis reveals that TMT openness exhibits differential effects across innovation types, with a more pronounced enhancing effect on digital technology innovation than non-digital technology innovation. Mechanism analyses reveal that TMTs with higher openness exhibit stronger innovation awareness, greater tolerance for uncertainties and reduced managerial myopia. Cross-sectional analyses show that the positive effect is larger among firms facing higher performance pressure, greater institutional ownership and more intense competition. Further analyses demonstrate that TMT openness is positively associated with R&D expenditure and personnel allocation. Moreover, TMT openness increases not only innovation quantity but innovation quality and efficiency. This study contributes to the literature by highlighting the role of TMT personality in corporate innovation and introducing an innovative measurement approach using large language models, providing methodological insights for future empirical research.