Artificial Intelligence, CEO Turnover, and Exploration Orientation in Firm Innovation

Leadership transitions often create uncertainty in corporate innovation. Our study shows that artificial intelligence (AI) plays a crucial role in helping firms navigate these transitions. Using data on patents, job postings, and CEO turnover across U.S. public firms, we find that organizations with stronger AI investment are more successful in pursuing explorative innovation after CEO turnover. AI enables this shift by helping leaders overcome two common barriers: managerial myopia, the tendency to rely on familiar past practices, and information overload, which can overwhelm new executives. Firms that leverage AI more effectively reallocate resources to research and development, elevate innovation as a strategic priority, and launch new initiatives. These effects are especially pronounced in manufacturing industries and when CEOs have science, technology, engineering, and mathematics backgrounds. For practice, our findings highlight AI as a strategic capability that helps firms sustain organizational creativity during leadership change. For policy, they suggest that promoting AI adoption could strengthen innovation dynamism and competitiveness in rapidly changing environments.