Innovation and Institutional Ownership
AbstractWe find that greater institutional ownership is associated with more innovation. To explore the mechanism, we contrast the "lazy manager" hypothesis with a model where institutional owners increase innovation incentives through reducing career risks. The evidence favors career concerns. First, we find complementarity between institutional ownership and product market competition, whereas the lazy manager hypothesis predicts substitution. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes, and disaggregating by type of institutional owner, we argue that the effect of institutions on innovation is causal. (JEL G23, G32, L25, M10, O31, O34)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 103 (2013)
Issue (Month): 1 (February)
Other versions of this item:
- Philippe Aghion & John Van Reenen & Luigi Zingales, 2010. "Innovation and Institutional Ownership," Working Papers 2010.99, Fondazione Eni Enrico Mattei.
- Aghion, Philippe & Van Reenen, John & Zingales, Luigi, 2009. "Innovation and Institutional Ownership," CEPR Discussion Papers 7195, C.E.P.R. Discussion Papers.
- Philippe Aghion & John Van Reenen & Luigi Zingales, 2009. "Innovation and Institutional Ownership," CEP Discussion Papers dp0911, Centre for Economic Performance, LSE.
- Philippe Aghion & John Van Reenen & Luigi Zingales, 2009. "Innovation and Institutional Ownership," NBER Working Papers 14769, National Bureau of Economic Research, Inc.
- Zingales, Luigi & Reenen, John Van & Aghion, Philippe, 2009. "Innovation and Institutional Ownership," Scholarly Articles 4481491, Harvard University Department of Economics.
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- M10 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - General
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property Rights
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