Ownership structure and innovation: An emerging market perspective
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Considerable attention has been focused on the ways in which emerging market firms can obtain and mobilize the knowledge and resources required for innovation. Innovation is a particular challenge in emerging markets because of inadequate external institutions. In this study, we focus on the importance of ownership structure, and in particular on ownership type diversity and ownership concentration. Using transaction cost and agency theories embedded in an emerging market context, we argue that ownership structure provides an important mechanism by which firms can assemble and direct the resources necessary for innovation in the context of inadequate external institutions. Specifically, we hypothesize that ownership type diversity improves innovation performance and that increasing ownership concentration has the same effect, but only up to a point. Using a panel dataset of 487 and 475 Chinese listed companies during 2004–2005 and 2005–2006 respectively, we find supportive empirical evidence for our hypotheses. Our findings also suggest that ownership type diversity is a more important factor in explaining innovation performance than ownership concentration, although most of the extant literature focuses on the latter.
KeywordsOwnership type Ownership concentration innovation Emerging markets
We are grateful to Editor-in-Chief Michael Carney and three anonymous reviewers for their helpful comments. We would like to thank Lisa Papania and Aidan Vining, who helped us frame some of the original ideas in this paper. We have also benefited from discussions with Michael Useem and William Judge. We thank Neeraj Sharma for research assistance and the Jack Austin Center for Asia Pacific Business Studies at SFU Beedie School of Business for financial support.
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