IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v199y2025ics0148296325003376.html

How do common institutional investors adapt to early technology adoption?

Author

Listed:
  • Zhang, Linghao
  • Jin, Xinwei
  • Wu, Kai

Abstract

We examine how common institutional investors (CIIs) adapt to firms’ early adoption of intelligent manufacturing (IM) technologies in China. Employing a staggered difference-in-differences (DID) approach based on China’s IM Pilot projects, we find that CIIs significantly increase their ownership of firms after they adopt IM, suggesting strategic portfolio adjustments. This effect is stronger in industries with higher concentration and firms facing greater information asymmetry. We identify profitability and innovation as key channels through which early technology adoption influences CIIs’ investment decisions. Additionally, we demonstrate spillover effects from pilot to non-pilot firms through CIIs. Furthermore, the increase in common institutional ownership (CIO) resulting from early technology adoption reduces the stock price crash risk, demonstrating governance benefits. Our findings contribute to the understanding of CIO determinants and investor behavior in response to technological change, offering insights for policymakers on the intersection of technological advancement, ownership structures, and market competition.

Suggested Citation

  • Zhang, Linghao & Jin, Xinwei & Wu, Kai, 2025. "How do common institutional investors adapt to early technology adoption?," Journal of Business Research, Elsevier, vol. 199(C).
    • Handle: RePEc:eee:jbrese:v:199:y:2025:i:c:s0148296325003376
    DOI: 10.1016/j.jbusres.2025.115514
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296325003376
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2025.115514?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. José Azar & Martin C. Schmalz & Isabel Tecu, 2018. "Anticompetitive Effects of Common Ownership," Journal of Finance, American Finance Association, vol. 73(4), pages 1513-1565, August.
    2. Daron Acemoglu & Pascual Restrepo, 2018. "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment," American Economic Review, American Economic Association, vol. 108(6), pages 1488-1542, June.
    3. Nathan Shekita, 2022. "Interventions by Common Owners [The Tax Acrobatics in the Dow-DuPont Deal]," Journal of Competition Law and Economics, Oxford University Press, vol. 18(1), pages 99-134.
    4. Liu, Jun & Yang, Yuan-jun & Cao, Ya-ru & Forrest, Jeffrey Yi-Lin, 2021. "Stimulating effects of intelligent policy on the performance of listed manufacturing companies in China," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 558-573.
    5. Edelen, Roger M. & Ince, Ozgur S. & Kadlec, Gregory B., 2016. "Institutional investors and stock return anomalies," Journal of Financial Economics, Elsevier, vol. 119(3), pages 472-488.
    6. Juan Ma & Tarun Khanna, 2016. "Independent directors' dissent on boards: Evidence from listed companies in China," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1547-1557, August.
    7. Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Journal of Financial Economics, Elsevier, vol. 32(1), pages 23-43, August.
    8. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    9. Hutton, Amy P. & Marcus, Alan J. & Tehranian, Hassan, 2009. "Opaque financial reports, R2, and crash risk," Journal of Financial Economics, Elsevier, vol. 94(1), pages 67-86, October.
    10. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(1), pages 25-46, January.
    11. Gilje, Erik P. & Gormley, Todd A. & Levit, Doron, 2020. "Who's paying attention? Measuring common ownership and its impact on managerial incentives," Journal of Financial Economics, Elsevier, vol. 137(1), pages 152-178.
    12. Mazur, Mieszko & Salganik-Shoshan, Galla & Walker, Thomas & Wang, Jun, 2018. "Proximity and litigation: Evidence from the geographic location of institutional investors," Journal of Financial Markets, Elsevier, vol. 40(C), pages 60-74.
    13. Majd, Saman & Pindyck, Robert S., 1987. "Time to build, option value, and investment decisions," Journal of Financial Economics, Elsevier, vol. 18(1), pages 7-27, March.
    14. Nerissa C. Brown & Kelsey D. Wei & Russ Wermers, 2014. "Analyst Recommendations, Mutual Fund Herding, and Overreaction in Stock Prices," Management Science, INFORMS, vol. 60(1), pages 1-20, January.
    15. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
    16. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2023. "Common Ownership, Competition, and Top Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1294-1355.
    17. Cohn, Jonathan B. & Liu, Zack & Wardlaw, Malcolm I., 2022. "Count (and count-like) data in finance," Journal of Financial Economics, Elsevier, vol. 146(2), pages 529-551.
    18. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," CESifo Working Paper Series 6908, CESifo.
    19. He, Jie (Jack) & Huang, Jiekun & Zhao, Shan, 2019. "Internalizing governance externalities: The role of institutional cross-ownership," Journal of Financial Economics, Elsevier, vol. 134(2), pages 400-418.
    20. Shelegia, Sandro & Spiegel, Yossi, 2012. "Bertrand competition when firms hold passive ownership stakes in one another," Economics Letters, Elsevier, vol. 114(1), pages 136-138.
    21. Marvin B. Lieberman & David B. Montgomery, 1988. "First‐mover advantages," Strategic Management Journal, Wiley Blackwell, vol. 9(S1), pages 41-58, June.
    22. Matvos, Gregor & Ostrovsky, Michael, 2008. "Cross-ownership, returns, and voting in mergers," Journal of Financial Economics, Elsevier, vol. 89(3), pages 391-403, September.
    23. Bayona, Anna & López, Ángel L. & Manganelli, Anton-Giulio, 2022. "Common ownership, corporate control and price competition," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1066-1075.
    24. Fernando F. Suárez & James M. Utterback, 1995. "Dominant designs and the survival of firms," Strategic Management Journal, Wiley Blackwell, vol. 16(6), pages 415-430.
    25. Francois Brochet & Kalin Kolev & Alina Lerman, 2018. "Information transfer and conference calls," Review of Accounting Studies, Springer, vol. 23(3), pages 907-957, September.
    26. Geroski, Paul, 2003. "The Evolution of New Markets," OUP Catalogue, Oxford University Press, number 9780199248896.
    27. David Easley & Marcos M. López de Prado & Maureen O'Hara, 2012. "Flow Toxicity and Liquidity in a High-frequency World," The Review of Financial Studies, Society for Financial Studies, vol. 25(5), pages 1457-1493.
    28. Park, Jihwon & Sani, Jalal & Shroff, Nemit & White, Hal, 2019. "Disclosure incentives when competing firms have common ownership," Journal of Accounting and Economics, Elsevier, vol. 67(2), pages 387-415.
    29. Emily Oster, 2019. "Unobservable Selection and Coefficient Stability: Theory and Evidence," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(2), pages 187-204, April.
    30. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 577-598.
    31. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    32. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    33. Liu, Qing & Lu, Yi, 2015. "Firm investment and exporting: Evidence from China's value-added tax reform," Journal of International Economics, Elsevier, vol. 97(2), pages 392-403.
    34. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-841, August.
    35. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 413-448, November.
    36. José Azar & Sahil Raina & Martin Schmalz, 2022. "Ultimate ownership and bank competition," Financial Management, Financial Management Association International, vol. 51(1), pages 227-269, March.
    37. Richard A. Weiss, 1998. "Global Sector Rotation: New Look at an Old Idea," Financial Analysts Journal, Taylor & Francis Journals, vol. 54(3), pages 6-8, May.
    38. Bresnahan, Timothy F. & Salop, Steven C., 1986. "Quantifying the competitive effects of production joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 155-175, June.
    39. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    40. Duchin, Ran & Sosyura, Denis, 2012. "The politics of government investment," Journal of Financial Economics, Elsevier, vol. 106(1), pages 24-48.
    41. Rhodes-Kropf, Matthew & Robinson, David T. & Viswanathan, S., 2005. "Valuation waves and merger activity: The empirical evidence," Journal of Financial Economics, Elsevier, vol. 77(3), pages 561-603, September.
    42. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    43. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
    44. Nofsinger, John R., 2001. "The impact of public information on investors," Journal of Banking & Finance, Elsevier, vol. 25(7), pages 1339-1366, July.
    45. Livingston, Miles, 1977. "Industry Movements of Common Stocks," Journal of Finance, American Finance Association, vol. 32(3), pages 861-874, June.
    46. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    47. Ofer Eldar & Jillian Grennan, 2024. "Common Venture Capital Investors and Startup Growth," The Review of Financial Studies, Society for Financial Studies, vol. 37(2), pages 549-590.
    48. Alan D. Crane & Sébastien Michenaud & James P. Weston, 2016. "Editor's Choice The Effect of Institutional Ownership on Payout Policy: Evidence from Index Thresholds," The Review of Financial Studies, Society for Financial Studies, vol. 29(6), pages 1377-1408.
    49. Russ Wermers, 1999. "Mutual Fund Herding and the Impact on Stock Prices," Journal of Finance, American Finance Association, vol. 54(2), pages 581-622, April.
    50. Kang, Jun-Koo & Luo, Juan & Na, Hyun Seung, 2018. "Are institutional investors with multiple blockholdings effective monitors?," Journal of Financial Economics, Elsevier, vol. 128(3), pages 576-602.
    51. Weiguo Zhong & Yanfeng Zheng, 2025. "Do political connections stifle firm innovation? Natural experimental evidence from China's anti‐corruption campaigns," Strategic Management Journal, Wiley Blackwell, vol. 46(5), pages 1183-1216, May.
    52. Boubakri, Narjess & El Ghoul, Sadok & Wang, He & Guedhami, Omrane & Kwok, Chuck C.Y., 2016. "Cross-listing and corporate social responsibility," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 123-138.
    53. Jin, Minghui & Chen, Yang, 2024. "Has green innovation been improved by intelligent manufacturing?—Evidence from listed Chinese manufacturing enterprises," Technological Forecasting and Social Change, Elsevier, vol. 205(C).
    54. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2025. "Innovation: The Bright Side of Common Ownership?," Management Science, INFORMS, vol. 71(5), pages 3713-3733, May.
    55. Ángel L. López & Xavier Vives, 2019. "Overlapping Ownership, R&D Spillovers, and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2394-2437.
    56. Jie (Jack) He & Jiekun Huang, 2017. "Product Market Competition in a World of Cross-Ownership: Evidence from Institutional Blockholdings," The Review of Financial Studies, Society for Financial Studies, vol. 30(8), pages 2674-2718.
    57. Hennig, Jan C. & Oehmichen, Jana & Steinberg, Philip J. & Heigermoser, Judith, 2022. "Determinants of common ownership: Exploring an information-based and a competition-based perspective in a global context," Journal of Business Research, Elsevier, vol. 144(C), pages 690-702.
    58. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
    59. Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2005. "On the Industry Concentration of Actively Managed Equity Mutual Funds," Journal of Finance, American Finance Association, vol. 60(4), pages 1983-2011, August.
    60. Li, Pei & Lu, Yi & Wang, Jin, 2016. "Does flattening government improve economic performance? Evidence from China," Journal of Development Economics, Elsevier, vol. 123(C), pages 18-37.
    61. Peter W. Roberts & Raphael Amit, 2003. "The Dynamics of Innovative Activity and Competitive Advantage: The Case of Australian Retail Banking, 1981 to 1995," Organization Science, INFORMS, vol. 14(2), pages 107-122, April.
    62. Jing Tan & Yaqiao Zhang & Hui Cao, 2023. "The FDI-spawned technological spillover effects on innovation quality of local enterprises: evidence from industrial firms and the patents in China," Applied Economics, Taylor & Francis Journals, vol. 55(49), pages 5800-5815, October.
    63. Cheng, Shijun, 2008. "Board size and the variability of corporate performance," Journal of Financial Economics, Elsevier, vol. 87(1), pages 157-176, January.
    64. Firth, Michael & Malatesta, Paul H. & Xin, Qingquan & Xu, Liping, 2012. "Corporate investment, government control, and financing channels: Evidence from China's Listed Companies," Journal of Corporate Finance, Elsevier, vol. 18(3), pages 433-450.
    65. Liu, Changyang & He, Jincai, 2024. "Does common institutional ownership improve the similarity of behavior between firms? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 83(C).
    66. Zhu, Minghao & Liang, Chen & Yeung, Andy C.L. & Zhou, Honggeng, 2024. "The impact of intelligent manufacturing on labor productivity: An empirical analysis of Chinese listed manufacturing companies," International Journal of Production Economics, Elsevier, vol. 267(C).
    67. Todd Mitton, 2022. "Methodological Variation in Empirical Corporate Finance," The Review of Financial Studies, Society for Financial Studies, vol. 35(2), pages 527-575.
    68. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    69. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    70. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June.
    71. Philippe Aghion & John Van Reenen & Luigi Zingales, 2013. "Innovation and Institutional Ownership," American Economic Review, American Economic Association, vol. 103(1), pages 277-304, February.
    72. Kim, Jeong-Bon & Li, Yinghua & Zhang, Liandong, 2011. "Corporate tax avoidance and stock price crash risk: Firm-level analysis," Journal of Financial Economics, Elsevier, vol. 100(3), pages 639-662, June.
    73. Kristopher Gerardi & Michelle Lowry & Carola Schenone, 2023. "A Critical Review of the Common Ownership Literature," FRB Atlanta Working Paper 2023-17, Federal Reserve Bank of Atlanta.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gibbon, Alexandra J. & Schain, Jan Philip, 2023. "Rising markups, common ownership, and technological capacities," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    2. Liu, Wenhua & Sun, Bohong & Zhao, Lili & Zhu, Pingheng, 2025. "Does common ownership affect stock price synchronicity?," Research in International Business and Finance, Elsevier, vol. 77(PB).
    3. Hou, Canran & Liu, Huan, 2023. "Institutional cross-ownership and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 65(C).
    4. Kristopher Gerardi & Michelle Lowry & Carola Schenone, 2023. "A Critical Review of the Common Ownership Literature," FRB Atlanta Working Paper 2023-17, Federal Reserve Bank of Atlanta.
    5. Liu, Xutang & Boubaker, Sabri & Liao, Jing & Yao, Shouyu, 2025. "The rise of common state ownership and corporate environmental performance," The British Accounting Review, Elsevier, vol. 57(5).
    6. Xiaohui Wu & Yumin Li & Chong Feng, 2023. "Green innovation peer effects in common institutional ownership networks," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 641-660, March.
    7. Chen, Shenglan & Ma, Hui & Wu, Qiang & Zhang, Hao, 2023. "Does common ownership constrain managerial rent extraction? Evidence from insider trading profitability," Journal of Corporate Finance, Elsevier, vol. 80(C).
    8. Albert Banal-Estanol & Jo Seldeslachts & Xavier Vives, 2022. "Ownership Diversification and Product Market Pricing Incentives," Discussion Papers of DIW Berlin 2023, DIW Berlin, German Institute for Economic Research.
    9. Hennig, Jan C. & Oehmichen, Jana & Steinberg, Philip J. & Heigermoser, Judith, 2022. "Determinants of common ownership: Exploring an information-based and a competition-based perspective in a global context," Journal of Business Research, Elsevier, vol. 144(C), pages 690-702.
    10. Dennis C. Hutschenreiter & Anna Toldrà-Simats & Bing Guo & David Pérez-Castrillo, 2023. "Institutional Blockholders and Corporate Innovation," Working Papers 1390, Barcelona School of Economics.
    11. Xu, Zhibo & Padmanabhan, Prasad & Huang, Chia-Hsing, 2025. "Does institutional cross-ownership reduce corporate shadow banking activities? Evidence from Chinese firms," Pacific-Basin Finance Journal, Elsevier, vol. 94(C).
    12. Park, Haerang & Pathan, Shams & Stathopoulos, Konstantinos & Marwick, Alex, 2024. "The bright side of common ownership: Evidence from bank transparency," The British Accounting Review, Elsevier, vol. 56(6).
    13. Koch, Andrew & Panayides, Marios & Thomas, Shawn, 2021. "Common ownership and competition in product markets," Journal of Financial Economics, Elsevier, vol. 139(1), pages 109-137.
    14. Khoo, Joye & Zheng, Chen & Pathan, Shams, 2024. "The beneficial effect of common ownership: Evidence from bank liquidity creation," Journal of Banking & Finance, Elsevier, vol. 163(C).
    15. repec:bge:wpaper:1371 is not listed on IDEAS
    16. Anting Li & Jianqiong Wang & Yaru Yang, 2026. "Dose common institutional ownership constrain tunneling?," Review of Managerial Science, Springer, vol. 20(4), pages 1193-1228, April.
    17. He, Yuhan & Lyu, Fengguang & Luo, Shougui, 2025. "Convergence or divergence? The impact of common institutional ownership on firms’ innovation trajectories," Research in International Business and Finance, Elsevier, vol. 80(C).
    18. Bayona, Anna & López, Ángel L. & Manganelli, Anton-Giulio, 2022. "Common ownership, corporate control and price competition," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1066-1075.
    19. Li, Ying & Zhao, Chen, 2025. "From shared stakeholders to strategic linkages: The impact of common ownership on supply chain diversification," Research in International Business and Finance, Elsevier, vol. 80(C).
    20. Wang, Shihao & Wang, Keyun & Guo, Mengting & Maqsood, Umer Sahil & Chen, Xuezhao, 2025. "Common institutional ownership and R&D manipulation," Technological Forecasting and Social Change, Elsevier, vol. 217(C).
    21. Li, Yumin & Zhu, Lei & Ke, Yanrong & Wu, Xiaohui, 2024. "Does common institutional ownership restrain corporate financialization?," International Review of Economics & Finance, Elsevier, vol. 95(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:199:y:2025:i:c:s0148296325003376. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.