Innovation and Institutional Ownership
We 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)
Volume (Year): 103 (2013)
Issue (Month): 1 (February)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bronwyn H. Hall, 2003.
"The Financing of Research and Development,"
- Bronwyn Hall, 2004. "The financing of research and development," Chapters, in: Financial Systems, Corporate Investment in Innovation, and Venture Capital, chapter 2 Edward Elgar Publishing.
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- Hall, Bronwyn H., 2002. "The Financing of Research and Development," Department of Economics, Working Paper Series qt34c1c643, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Bronwyn H. Hall, 2002. "The Financing of Research and Development," NBER Working Papers 8773, National Bureau of Economic Research, Inc.
- Hall, Bronwyn, 2002. "The Financing of Research and Development," Department of Economics, Working Paper Series qt5rf0x9gz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
- Pruitt, Stephen W & Wei, K C John, 1989. " Institutional Ownership and Changes in the S&P 500," Journal of Finance, American Finance Association, vol. 44(2), pages 509-513, June.
- Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, 02.
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