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Founder control and breakthrough innovation: Evidence from high-tech firms in China

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  • Zhang, Zi-Qi
  • Tang, Bao-Jun
  • Su, Zhi
  • Zhang, Yongji

Abstract

We examine the effect of founder control on breakthrough innovation among Chinese high-tech firms from 2008 to 2022. We measure founder control by the equity held by founders actively involved in governance and identify breakthrough innovation with Sentence-BERT (SBERT) embeddings of patent texts. We find a strong positive association between founder control and future breakthrough innovation. Using unexpected founder departures as an instrument, our identification strategy establishes a robust causal relationship. The underlying mechanisms include talent investment, internal discipline, strategic reorientation, and technological resilience. The effect is heterogeneous across founding team's size, internal structure, attributes, and tenure. Our results support a structural view of founder governance where concentrated control serves as an engine for corporate innovation.

Suggested Citation

  • Zhang, Zi-Qi & Tang, Bao-Jun & Su, Zhi & Zhang, Yongji, 2025. "Founder control and breakthrough innovation: Evidence from high-tech firms in China," China Economic Review, Elsevier, vol. 94(PB).
    • Handle: RePEc:eee:chieco:v:94:y:2025:i:pb:s1043951x25002305
    DOI: 10.1016/j.chieco.2025.102572
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