Innovation: The Bright Side of Common Ownership?

Miguel Antón (), Florian Ederer, Mireia Giné () and Martin Schmalz ()
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Miguel Antón: IESE Business School, 08034 Barcelona, Spain
Mireia Giné: IESE Business School, 08034 Barcelona, Spain; and Centre for Economic Policy Research (CEPR), London EC1V 0DX, United Kingdom; and European Corporate Governance Institute (ECGI), 1000 Brussels, Belgium; and WRDS, Philadelphia, Pennsylvania 19104
Martin Schmalz: Centre for Economic Policy Research (CEPR), London EC1V 0DX, United Kingdom; and European Corporate Governance Institute (ECGI), 1000 Brussels, Belgium; and University of Oxford Saïd Business School, Oxford OX1 1HP, United Kingdom; and CESifo, 81679 Munich, Germany; and C-SEB, 50923 Cologne, Germany

Management Science, 2025, vol. 71, issue 5, 3713-3733

Abstract: Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture the full surplus of its innovations. We show that, in theory, common ownership of firms mitigates this impediment to corporate innovation. By contrast, without technological spillovers, innovation has the effect of stealing market share from rivals and in that case more common ownership reduces innovation. Empirically, the association between common ownership and innovation inputs and outputs decreases with product market proximity and increases with technology proximity. The sign and magnitude of the overall relationship between common ownership and corporate innovation thus varies considerably across the universe of firms depending on their relative proximity in technology and product market space. Some of these results persist if we use only variation from BlackRock’s acquisition of BGI. Our findings inform the debate about the welfare effects of increasing common ownership among U.S. corporations.

Keywords: common ownership; innovation; competition; R&D (search for similar items in EconPapers)
Date: 2025
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http://dx.doi.org/10.1287/mnsc.2024.04363 (application/pdf)

Related works:
Working Paper: Innovation: The Bright Side of Common Ownership? (2024)
Working Paper: Innovation: The Bright Side of Common Ownership? (2024)
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