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Does corporate ownership matter for innovation?

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  • Sanghoon Lee

Abstract

Corporate governance theories suggest that concentrated ownership can be a mechanism for addressing the agency problem in a firm, and large shareholders matter for managerial decisions. Theoretically, the effect of large shareholders on innovation proxied by R&D is not determined yet, since their risk averseness and long-term time horizon affect R&D investment in opposite direction. It is quite unclear which effect is dominant. Thus, this issue should be explored by empirical evidence. The effect of ownership concentration on R&D investment is empirically examined by using firm-level panel data of Korea between 1980 and 2018. The empirical findings are: i) the effect of ownership on R&D is negative; ii) a bell-shaped relationship between ownership and R&D is observed; iii) the negative effect of ownership on R&D is found in old firms only; iv) the effect of ownership on R&D is positive for large firms and negative for small firms; and v) the effect of ownership on R&D is positive before the financial crisis.

Suggested Citation

  • Sanghoon Lee, 2023. "Does corporate ownership matter for innovation?," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 28(1), pages 314-329, January.
    • Handle: RePEc:taf:rjapxx:v:28:y:2023:i:1:p:314-329
    DOI: 10.1080/13547860.2021.1884174
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