Do institutional investors still encourage patent-based innovation after the tech bubble period?

Hsiu-yun Chang, Woan-lih Liang and Yanzhi Wang

Journal of Empirical Finance, 2019, vol. 51, issue C, 149-164

Abstract: This paper reexamines the effect of institutional ownership on corporate patent-based innovation. Using an updated sample, we confirm that higher institutional ownership leads to more innovations, including more citations received by patents of a firm, and higher patent generality and originality. However, we find that the impact of institutional ownership on patent-based innovation greatly decreases after the tech bubble bursts and this lower support is driven by both transient and non-transient institutional investors. We do not find that institutional investors intentionally lower their support of patent-based innovation for improving this less efficient innovation. Our results support the contention that the exorbitant litigation cost of patents lowers the incentives for institutional investors to invest in patent-based innovation after 2000.

Keywords: Institutional ownership; Innovation; Patent; Patent cost (search for similar items in EconPapers)
JEL-codes: G23 G32 O31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:51:y:2019:i:c:p:149-164

DOI: 10.1016/j.jempfin.2019.02.003

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