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Myopic Investor or Active Monitor? The Role of Institutional Investors in Corporate Innovation

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  • Xiaoyan Xu
  • Chunlei Wang
  • Shijun Cheng

Abstract

We examine the role of institutional investors in firms¡¯ innovation strategies. We find that although institutional shareholding is positively related to the likelihood of patenting, it is not related to firms¡¯ exploratory innovation activities. Moreover, the presence of a block institutional holder or the holding by long-term investors has strong negative effect on exploratory innovations. Our study provides new insights to the role of institutional investors in firms¡¯ innovation decisions.

Suggested Citation

  • Xiaoyan Xu & Chunlei Wang & Shijun Cheng, 2015. "Myopic Investor or Active Monitor? The Role of Institutional Investors in Corporate Innovation," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(2), pages 23-32, April.
    • Handle: RePEc:jfr:ijfr11:v:6:y:2015:i:2:p:23-32
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    References listed on IDEAS

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    5. Gautam Ahuja & Curba Morris Lampert, 2001. "Entrepreneurship in the large corporation: a longitudinal study of how established firms create breakthrough inventions," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 521-543, June.
    6. Corey C. Phelps, 2010. "A longitudinal study of the influence of alliance network structure and composition on firm exploratory innovation," Post-Print hal-00528392, HAL.
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    Cited by:

    1. Fu, Lili & Pan, Liyuan & Wu, Fengyun, 2021. "Does passive investment have a positive governance effect? Evidence from index funds ownership and corporate innovation," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 524-545.
    2. Umeair Shahzad & Jing Liu & Faisal Mahmood & Fukai Luo, 2021. "Corporate innovation and trade credit demand: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1591-1606, September.
    3. Susanne Berger & Herbert Stocker & Achim Zeileis, 2017. "Innovation and institutional ownership revisited: an empirical investigation with count data models," Empirical Economics, Springer, vol. 52(4), pages 1675-1688, June.

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