The effect of privatization on the characteristics of innovation

Hyacinthe Y. Somé, Marcelo Cano‐Kollmann, Ram Mudambi and Jean‐Claude Cosset

Financial Management, 2021, vol. 50, issue 3, 875-898

Abstract: We investigate the role of privatization on the dynamics of innovation. We hypothesize that privatized firms will focus on a narrower set of technologies as a response to increased pressure for profitability and short‐term results, and that privatization will also increase the degree to which they engage in collaborations with external inventors, both locally and abroad. Using a sample of privatized firms in 25 countries, we find strong evidence supporting these hypotheses. Importantly, we find that overall patenting activities and, in particular, overseas collaboration in technological innovation are associated with greater firm performance, but only after privatization.

Date: 2021
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