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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 D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number 1_2011.

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Date of creation: 01 Feb 2011
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Handle: RePEc:prt:dpaper:1_2011

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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, 2014. "Bank support and export: evidence from small Italian firms," Small Business Economics, Springer, vol. 42(2), pages 245-264, February.
  2. Volker Ziemann, 2013. "Do Structural Policies Affect Macroeconomic Stability?," OECD Economics Department Working Papers 1075, OECD Publishing.
  3. Maurizio Iacopetta & Alessandro Giovannini & Raoul Minetti, 2013. "Financial Markets Banks and Growth disentangling the links," Sciences Po publications 2013-13, Sciences Po.
  4. 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.
  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. Bartoli, Francesca & Ferri, Giovanni & Murro, Pierluigi & Rotondi, Zeno, 2013. "Bank–firm relations and the role of Mutual Guarantee Institutions at the peak of the crisis," Journal of Financial Stability, Elsevier, vol. 9(1), pages 90-104.

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