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

Félix López-Iturriaga (flopez@eco.uva.es) and Emilio Lopez-Millan (eltitoemilio@hotmail.com)
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Emilio Lopez-Millan: University of Valladolid

HSE Working papers from National Research University Higher School of Economics

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.

Keywords: Institutional setting; ownership structure; corporate R&D; legal protection (search for similar items in EconPapers)
JEL-codes: G32 O32 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2015
New Economics Papers: this item is included in nep-cfn, nep-ino, nep-law and nep-tid
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Citations: View citations in EconPapers (1)

Published in WP BRP Series: Management / MAN, April 2015, pages 1-39

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:36man2015

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