Innovation and Institutional Ownership
Philippe Aghion,
John van Reenen and
Luigi Zingales
No 93414, Institutions and Markets Papers from Fondazione Eni Enrico Mattei (FEEM)
Abstract:
We find that institutional ownership in publicly traded companies is associated with more innovation (measured by cite-weighted patents). To explore the mechanism through which this link arises, we build a model that nests the lazy-manager hypothesis with career-concerns, where institutional owners increase managerial incentives to innovate by reducing the career risk of risky projects. The data supports the career concerns model. First, whereas the lazy manager hypothesis predicts a substitution effect between institutional ownership and product market competition (and managerial entrenchment generally), the career-concern model allows for complementarity. Empirically, we reject substitution effects. Second, CEOs are less likely to be fired in the face of profit downturns when institutional ownership is higher. Finally, using instrumental variables, policy changes and disaggregating by type of owner we find that the effect of institutions on innovation does not appear to be due to endogenous selection.
Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 65
Date: 2010-08
References: Add references at CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
https://ageconsearch.umn.edu/record/93414/files/NDL2010-099.pdf (application/pdf)
Related works:
Journal Article: Innovation and Institutional Ownership (2013) 
Working Paper: Innovation and Institutional Ownership (2010) 
Working Paper: Innovation and Institutional Ownership (2009) 
Working Paper: Innovation and Institutional Ownership (2009) 
Working Paper: Innovation and institutional ownership (2009) 
Working Paper: Innovation and Institutional Ownership (2009) 
Working Paper: Innovation and Institutional Ownership (2009) 
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:ags:feemim:93414
DOI: 10.22004/ag.econ.93414
Access Statistics for this paper
More papers in Institutions and Markets Papers from Fondazione Eni Enrico Mattei (FEEM) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().