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Transparency and firm innovation

Zhong, Rong (Irene)

Journal of Accounting and Economics, 2018, vol. 66, issue 1, 67-93

Abstract: Firm innovation drives both firm competitiveness and economic growth. Constructing a novel firm-patent panel database from 29 countries, I find that transparency directly boosts innovative effort by reducing managerial career concerns. This effect operates through transparency's implicit contracting role: it reduces the sensitivity of management turnover to poor innovative output. Transparency also increases innovative efficiency through its governance role in facilitating efficient allocation of R&D capital. Nonetheless, the benefit of transparency is fully offset in environments with greater proprietary cost. These findings illuminate the unique roles and mechanisms of transparency in promoting innovation incentives and outcomes.

Keywords: R&D; Career concern; Management turnover; Implicit contracting; Proprietary cost; Corporate governance (search for similar items in EconPapers)
JEL-codes: G15 G30 M40 M41 N20 (search for similar items in EconPapers)
Date: 2018
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Journal of Accounting and Economics is currently edited by J. L. Zimmerman, S. P. Kothari, T. Z. Lys and R. L. Watts

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