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Government Share Ownership and Innovation: Evidence from European Listed Firms


  • Bernardo Bortolotti
  • Veljko Fotak
  • Brian Wolfe


We investigate the impact of government ownership on the innovativeness of European listed firms. We find that firms with minority government stakes invest more in research and development (R&D) than private firms, thanks to relaxed financial constraints. However, firms with majority government stakes invest less due to short-term political priorities distorting managerial objectives and incentives. Our results are robust to propensity score matching and instrumental variables to account for omitted variable bias and the endogenous nature of government ownership. On the output side, despite the higher investment in R&D, minority government ownership has no discernable impact on patent quantity and quality, as measured by citations. Our results indicate that government ownership is not an efficient policy to promote innovation in listed firms.

Suggested Citation

  • Bernardo Bortolotti & Veljko Fotak & Brian Wolfe, 2018. "Government Share Ownership and Innovation: Evidence from European Listed Firms," BAFFI CAREFIN Working Papers 1872, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
  • Handle: RePEc:baf:cbafwp:cbafwp1872

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    Cited by:

    1. Landoni, Matteo, 2020. "Knowledge creation in state-owned enterprises," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 77-85.
    2. Hurtak, Stefan & Kashyap, Vishal & Ehret, Michael, 2022. "Lightening the dark side of customer participation – The mitigating role of relationship performance in business-to-business project contexts," Journal of Business Research, Elsevier, vol. 140(C), pages 220-231.

    More about this item


    Innovation; R&D; state ownership;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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