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Ownership Structure, Governance, and Innovation: Evidence from Italy

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  • Raoul Minetti
  • Pierluigi Murro
  • Monica Paiella

Abstract

This paper tests the impact of firms’ ownership structure on firms’ innovation decisions using a rich dataset of about 20,000 Italian manufacturers. After accounting for its possible endogeneity, we find that ownership concentration negatively affects the probability of innovation, especially by reducing firms’ R&D effort. The analysis reveals that conflicts of interest between large and minority shareholders are a determinant of the negative effect of ownership concentration on innovation. Moreover, risk aversion induced by lack of financial or industrial diversification appears to be an additional source of large shareholders’ reluctance to innovate. Once we distinguish across types of shareholders, we uncover some evidence that families support innovation more than financial institutions, but that the benefits of financial institutions for technological change increase with their equity stakes. Collectively, the findings suggest that innovation is a channel through which agency problems among shareholders influence firm performance.

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Bibliographic Info

Paper provided by Department of the Treasury, Ministry of the Economy and of Finance in its series Working Papers with number 10.

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Length: 41
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:itt:wpaper:wp2012-10

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Keywords: Ownership; Agency Problems; Technological Change;

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Cited by:
  1. Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2011. "Bank-firm relations and the role of Mutual Guarantee Institutions during the crisis," series 0034, Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari, revised Jan 2011.
  2. Pilar Beneito & María E. Rochina-Barrachina & Amparo Sanchis, 2013. "Ownership and cyclicality of firms’ R&D investment," Working Papers 1306, Department of Applied Economics II, Universidad de Valencia.
  3. Alessandro Giovannini & Maurizio Iacopetta & Raoul Minetti, 2013. "Financial markets, Banks, and Growth : disentangling the links," Documents de Travail de l'OFCE 2013-23, Observatoire Francais des Conjonctures Economiques (OFCE).
  4. Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2014. "Bank support and export: evidence from small Italian firms," Small Business Economics, Springer, vol. 42(2), pages 245-264, February.
  5. Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2012. "SME Financing and the Choice of Lending Technology in Italy: Complementarity or Substitutability?," Working Papers CASMEF 1212, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  6. Volker Ziemann, 2013. "Do Structural Policies Affect Macroeconomic Stability?," OECD Economics Department Working Papers 1075, OECD Publishing.

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