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Government Share Ownership and Innovation: Evidence from European Listed Firms

Bernardo Bortolotti, Veljko Fotak and Brian Wolfe

No 1872, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: 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.

Keywords: Innovation; R&D; state ownership (search for similar items in EconPapers)
JEL-codes: G15 G32 G38 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2018
New Economics Papers: this item is included in nep-cfn, nep-ino and nep-tid
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