Intracompany Governance and Innovation

Sharon Belenzon, Tomer Berkovitz and Patrick Bolton

No 15304, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the relation between ownership, corporate form, and innovation for a cross-section of private and publicly traded innovating firms in the US and 15 European countries. A striking novel observation emerges from our analysis: while most innovating firms in the US are publicly traded conglomerates, a substantial fraction of innovation is concentrated in private firms and in business groups in continental European countries. We find virtually no variation across US industries in the corporate form of innovating firms, but a substantial variation across industries in continental European countries, where business groups tend to be concentrated in industries with a slower and more fundamental innovation cycle and where intellectual protection of innovators seems to be of paramount importance. Our findings suggest that innovative companies choose the corporate form most conducive to R&D, as predicted by the Coasian view of how firms form. This is especially true in Europe, where there are fewer regulatory hurdles to the formation of business groups and hybrid corporate forms. It is less the case in the US, where conglomerates are generally favored.

JEL-codes: O16 O31 O32 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eec, nep-ino, nep-ipr, nep-pr~, nep-reg and nep-sbm
Note: CF IO LE
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Citations: View citations in EconPapers (8)

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