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Institutional Framework, Corporate Ownership Structure, and R&D Investment: An International Analysis

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  • Felix J. Lopez-Iturriaga

    (National Research University Higher School of Economics)

  • Emilio Lopez-Millan

    (University of Valladolid)

Abstract

We combine agency theory with the law and finance approach to analyze how the legal protection of investors and the corporate ownership structure affect the corporate investment in research and development (R&D). We use information from 1,091 firms from the five most R&D intensive industries in 19 developed countries. Our results show that the better protection of investors’ rights by the institutional environment has a positive influence on corporate R&D. We also find that corporate ownership concentration works as a substitute for legal protection. This finding means that the R&D investment of the firms in the countries with poor legal protection increases as long as the ownership becomes more concentrated. Our results also show that the identity of shareholders has a relevant effect: Whereas banks and nonfinancial institutions as shareholders result in lower R&D, institutional investors as shareholders increase the corporate investment in R&D.

Suggested Citation

  • Felix J. Lopez-Iturriaga & Emilio Lopez-Millan, 2015. "Institutional Framework, Corporate Ownership Structure, and R&D Investment: An International Analysis," HSE Working papers WP BRP 36/MAN/2015, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:36man2015
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    More about this item

    Keywords

    Institutional setting; ownership structure; corporate R&D; legal protection;
    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
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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