Although there is evidence that executive inventors with hands-on innovation experience promote firm innovation, existing research has not yet investigated the effects of executive free-riders, who do not put real effort into the R&D process but only share the results, on firm innovation. To address this gap, we leverage the free-riding theory and propose that executive free-riding behavior misappropriates the intellectual property of employee inventors and discourages their motivation to innovate, thus undermining firm innovation. By establishing a unique inventor-level panel data for Chinese listed firms and leveraging the difference-in-differences (DD) research design, our analyses show that executive’s free-riding behavior reduces the innovation productivity of (a) inventors who are directly free-ridden by executives (i.e., direct effect) and (b) the rest inventors who are not subjected to but witness such executive free-riding behavior within the same company (i.e., spillover effect). Besides, our results further show that inventors who are directly free-ridden by the executive tend to get promoted in a faster pace. By identifying specific free-riding behavior of the executive and exploring the underlying mechanisms at the individual inventor level, this study contributes to the literature on executive inventors and more broadly corporate governance and firm innovation.
