EconPapers    
Economics at your fingertips  
 

DO STOCK BUYBACKS SUPPRESS CORPORATE INNOVATION?

Tim Swift ()
Additional contact information
Tim Swift: Saint Joseph’s University, 5600 City Avenue, Philadelphia, PA 19118, United States

International Journal of Innovation Management (ijim), 2022, vol. 26, issue 06, 1-24

Abstract: In 2021, the United States (U.S.) publicly traded firms repurchased nearly $850 billion of their own shares, setting an all-time record. Given the enormous scale of this resource allocation away from investment in innovation and growth and toward shareholders, it is reasonable to consider if these buybacks create opportunity costs. Stock buybacks increase earnings per share, even in the wake of no earnings growth, driving up share price and benefitting the top executives who make these capital allocation decisions by increasing the value of their stock options. Pundits disagree on the impact that high levels of buybacks have on the economy, some arguing that stock buybacks come at the expense of strategic investment in innovation while others point to diminishing returns to research and development (RnD) investment as the reason for decreases in innovative activity. This paper empirically tests whether share buybacks are suppressing corporate innovation in ways that control for widely observed declines in returns to R&D investment, and the endogenous relationship between stock buybacks and innovation. Statistical analysis provides strong evidence that share buybacks are suppressing corporate innovation. This has enormous ramifications to the long-term viability of U.S. industries and to social justice.

Keywords: Corporate innovation; R&D; share repurchases; social justice (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S1363919622500372
Access to full text is restricted to subscribers

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:wsi:ijimxx:v:26:y:2022:i:06:n:s1363919622500372

Ordering information: This journal article can be ordered from

DOI: 10.1142/S1363919622500372

Access Statistics for this article

International Journal of Innovation Management (ijim) is currently edited by Joe Tidd

More articles in International Journal of Innovation Management (ijim) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

 
Page updated 2025-03-20
Handle: RePEc:wsi:ijimxx:v:26:y:2022:i:06:n:s1363919622500372