Innovation and Institutional Ownership

Philippe Aghion, John van Reenen and Luigi Zingales

American Economic Review, 2013, vol. 103, issue 1, 277-304

Abstract: We find that greater institutional ownership is associated with more innovation. To explore the mechanism, we contrast the "lazy manager" hypothesis with a model where institutional owners increase innovation incentives through reducing career risks. The evidence favors career concerns. First, we find complementarity between institutional ownership and product market competition, whereas the lazy manager hypothesis predicts substitution. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes, and disaggregating by type of institutional owner, we argue that the effect of institutions on innovation is causal. (JEL G23, G32, L25, M10, O31, O34)

JEL-codes: G23 G32 L25 M10 O31 O34 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.1.277
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Citations: View citations in EconPapers (641)

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Related works:
Working Paper: Innovation and Institutional Ownership (2010)
Working Paper: Innovation and Institutional Ownership (2010)
Working Paper: Innovation and Institutional Ownership (2009)
Working Paper: Innovation and Institutional Ownership (2009)
Working Paper: Innovation and institutional ownership (2009)
Working Paper: Innovation and Institutional Ownership (2009)
Working Paper: Innovation and Institutional Ownership (2009)
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