Do Leaders Matter? Natural Experiment and Quantitative Case Study of Indian State Owned Laboratories

Our study is one of the first natural experiments around the role of leaders in the context of firms. Also while most prior natural experiments around leadership in the policy world have exploited the death of the leader, we exploit an alternate exogenous shock – rigid bureaucratic rules that constraint the appointment of leaders to 42 Indian public R&D labs with 12,500 employees. The bureaucratic rules ensure that the timing of leadership change is uncorrelated with observable or unobservable firm level characteristics. This enables us to circumvent the issues related to the use of manager fixed effects in the prior empirical literature. Efforts to incentivize individual employees to file and license patents did not meet with immediate success. However patenting and licensing both increased once leaders at individual labs were replaced