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Barbarians at the gate? Institutional investors and firm innovation Investment: The moderating role of female executives

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  • Yin, Ximing
  • Su, Yaxin
  • Coles, Ryan
  • Cui, Victor

Abstract

Innovation financing plays a vital role in firms' technological advancement, yet how institutional investors affect firm innovation remains a subject of debate. To reconcile the inconsistent findings in existing literature, this paper establishes a unified framework and demonstrates that institutional investors exert a curvilinear effect on firm innovation investment. The initial funding provided by institutional investors serves as a catalyst for innovation spending through an influx of resource-based positive net effect into the firm. However, with institutional shareholding goes up, there is a turning point where the negative myopia effect exceeds the positive resource effect and takes dominance, thereafter more excessive institutional investment leads to a decline in innovation investment due to the net negative effect of institutional invest on the focal firm's strategic decision-making. We also postulate that gender-specific management styles could moderate this effect such that excessive institutional holdings reduce innovation investment at a slower rate. We test our arguments using a multiple-sourced panel dataset covering 2066 Chinese publicly listed firms from 2011 to 2019. Results show that (1) institutional investors have a curvilinear impact, taking an inverted U-shape, on firm innovation investment, and (2) the presence of women executives in top management teams moderates this curvilinear relationship. This study contributes to a holistic scholarly understanding on the double-edged effect and how to leverage the positive role of gender to make the best of external institutional investment.

Suggested Citation

  • Yin, Ximing & Su, Yaxin & Coles, Ryan & Cui, Victor, 2025. "Barbarians at the gate? Institutional investors and firm innovation Investment: The moderating role of female executives," Technovation, Elsevier, vol. 147(C).
    • Handle: RePEc:eee:techno:v:147:y:2025:i:c:s0166497225001518
    DOI: 10.1016/j.technovation.2025.103319
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