Rethinking the government as innovator: Evidence from Asian firms

Sharon Poczter ()
Additional contact information
Sharon Poczter: Cornell University

Asia Pacific Journal of Management, 2017, vol. 34, issue 2, No 6, 367-397

Abstract: Abstract Can government ownership of a firm spur innovation? While a robust body of empirical and theoretical work suggests that government ownership suppresses innovation, the increasing global competitiveness of government-owned firms coupled with the transition of these firms’ competitive advantage from low-cost labor-focused to innovation-focused suggests we reconsider the relationship between government ownership and innovation. This paper develops and tests a theory that a minority level of government ownership has a positive influence on firm-level innovation, by substituting for a better-developed financial market and alleviating financial constraints. By combining the incentives and monitoring benefits of private ownership with the more “patient” shareholders of and protection from failure by the state, minority government ownership can provide an environment for firms to pursue otherwise risky innovative projects. The testing of this theory makes use of a large sample of Asian firms, and the results with respect to matched minority government-owned and privately held firms show that minority government ownership increases the likelihood of innovation among financially constrained firms; moreover, it especially increases the likelihood of process innovation (as opposed to product innovation), which is traditionally difficult to finance. The study’s results—which stand to benefit firms and governments worldwide—remain robust to alternative mechanisms and controls, as well as to a variety of sensitivity tests.

Keywords: Government ownership; Innovation; Financing (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s10490-016-9475-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:asiapa:v:34:y:2017:i:2:d:10.1007_s10490-016-9475-y

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/10490/PS2

DOI: 10.1007/s10490-016-9475-y

Access Statistics for this article

Asia Pacific Journal of Management is currently edited by Jane Lu

More articles in Asia Pacific Journal of Management from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().