The Impact of Family-Based Human Capital on Corporate Innovation: Evidence from Sibling-Chairpersons in China

Nianhang Xu (), Kam C. Chan (), Rongrong Xie (), Qinyuan Chen () and Sumit Agarwal ()
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Nianhang Xu: School of Business, Renmin University of China, Beijing 100872, China
Kam C. Chan: Research Center of Finance, Shanghai Business School, Shanghai 201209, China
Rongrong Xie: School of Accountancy, Central University of Finance and Economics, Beijing 100081, China
Qinyuan Chen: Business School, Nanjing University, Nanjing 210093, China
Sumit Agarwal: Business School, National University of Singapore, Singapore 119245, Singapore

Management Science, 2024, vol. 70, issue 10, 7062-7089

Abstract: We examine the impact of family-based human capital stemming from a chairperson’s having siblings vis-à-vis not having siblings on corporate innovation in Chinese family firms. Using hand-collected data, we document that when a firm has a sibling-chairperson, it holds more patents, receives more total citations to its patents, and has greater innovation efficiency and innovation quality than an otherwise equivalent firm with a chairperson having no siblings. The results are economically significant and robust to a battery of robustness checks. Specifically, the findings remain intact after using China’s one-child policy as an exogenous shock to apply a regression discontinuity research design to mitigate endogeneity. Additional analyses suggest that the mechanisms behind the impact of siblings on innovation are consistent with family-based human capital embedded in the sibling relationships such as competition, knowledge spillover, and family firm succession effect among siblings. Furthermore, we show that sibling comanagement and sibling gender diversity matter in corporate innovation. In addition, sibling effect enhances corporate investment efficiency, stock returns, and merger and acquisition performance. Overall, family-based human capital from siblings positively contributes to corporate innovation.

Keywords: innovation; siblings; family-based human capital; one-child policy (search for similar items in EconPapers)
Date: 2024
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