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Leviathan as an inventor: An extended agency model of state-owned versus private firm invention in emerging and developed economies

Abstract

We examine the relative merits of state (SOE) and private (POE) ownership on firm invention output in emerging as well as developed economies. Firm SOE affords a vehicle by which governments throughout the world encourage risky investment in new technological paths. Yet, from a traditional agency–theoretical standpoint, SOEs are plagued by low-powered incentives and dysfunctional involvement (e.g., wasteful budgets and political meddling), which reduces SOE performance, relative to POEs. To examine this paradox, we build an extended agency model which, rather than overlooking agency cost drivers, entertains a more balanced view, in which these so-called agency “liabilities” in fact benefit SOEs, particularly in the sphere of inventions. We argue that, given relatively higher levels of managerial autonomy, SOEs may outperform POEs in some types of inventive output. We further propose that key boundary conditions operate to modify this base effect, in that contexts lacking political constraints – a condition found in most emerging economies – increase the risk of political meddling, reducing managerial autonomy so that any SOE inventive advantages wane significantly. We also hypothesize that this negative effect of weak institutions is attenuated in high invention productivity sectors. Empirically, we track the frequency, pioneerism, and impact of patent inventions of 521 SOEs and matched POEs for 16 years, across 43 countries and 22 industries. We find empirical support for our hypotheses based on a robust set of fixed-effects regression analyses, aided by a battery of checks to assess self-selection and omitted variable bias.

Résumé

Dans cet article, nous examinons les mérites relatifs de la propriété d’État (PE) et privée (PP) sur la production d’inventions des firmes dans les économies émergentes et développées. La propriété d’État des entreprises offre un moyen par lequel les gouvernements du monde entier encouragent les investissements risqués dans de nouvelles voies technologiques. Pourtant, du point de vue de la théorie de l’agence traditionnelle, les PE sont en proie à des incitations de faible pouvoir et à une implication dysfonctionnelle (par exemple, des budgets inutiles et des ingérences politiques), ce qui réduit les performances des PE par rapport aux PP. Pour examiner ce paradoxe, nous construisons un modèle d’agence étendu qui, au lieu de négliger les vecteurs de coûts d’agence, offre une vision plus équilibrée où ces soi-disant «handicaps» d’agence profitent en fait aux PE, en particulier dans le domaine des inventions. Nous soutenons que, compte tenu des niveaux relativement plus élevés d’autonomie managériale, les PE peuvent être plus performantes que les PP dans certains types de résultats liés aux inventions. Nous proposons en outre que les conditions aux limites clés fonctionnent pour modifier cet effet de base, dans la mesure où les contextes dépourvus de contraintes politiques – une condition que l’on retrouve dans la plupart des économies émergentes – augmentent le risque d’ingérence politique, réduisant l’autonomie managériale de sorte que tous les avantages liés aux inventions des PE diminuent de manière significative. Nous émettons également l’hypothèse que cet effet négatif de la faiblesse des institutions est atténué dans les secteurs innovants à forte productivité. Sur le plan empirique, nous suivons la fréquence, le «pionnierisme» et l’impact des inventions brevetées de 521 PE et des PP correspondants pendant 16 ans, dans 43 pays et 22 industries. Nous trouvons une confirmation empirique à nos hypothèses basées sur un ensemble robuste d’analyses de régression à effets fixes, aidées par une série de contrôles pour évaluer l’auto-sélection et le biais variable omis.

Resumen

En este artículo, examinamos los méritos relativos de la propiedad estatal (SOE por sus iniciales en inglés) y privada (POE por sus iniciales en inglés) de los resultados de invención de la empresa tanto en economías emergentes como desarrolladas. La propiedad estatal de empresa ofrece un vehículo mediante el cual los gobiernos de todo el mundo fomentan las inversiones arriesgadas en nuevos caminos tecnológicos. Sin embargo, desde un punto de vista tradicional de la teoría de agencia, las empresas de propiedad estatal están plagadas de incentivos de bajo poder y de participación disfuncional (por ejemplo, presupuestos derrochadores e intromisión política), lo cual reduce el desempeño de las empresas de propiedad estatal, con relación al de las empresas de propiedad privada. Para examinar esta paradoja, construimos un modelo de agencia extendido el cual, en lugar de pasar por alto los impulsadores de los costos de agencia, alberga una visión más balanceada, en donde las llamadas “desventajas” de agencia de hecho benefician las empresas de propiedad estatal, particularmente en la esfera de las invenciones. Argumentamos que, dada los relativamente altos niveles de autonomía gerencial, las empresas de propiedad estatal pueden superar a las empresas de propiedad privada en algunos tipos de resultados inventivos. Además, proponemos que las condiciones límite clave operan para modificar este efecto de base -aumentar el riesgo de intromisión política, reduciendo la autonomía gerencial y de esta manera las ventajas inventivas de cualquier empresa de propiedad estatal disminuyen considerablemente. También planteamos la hipótesis que este efecto negativo de instituciones débiles es atenuado en sectores de alta productividad inventiva. Empíricamente, realizamos un seguimiento de la frecuencia, el pioneroismo y el impacto de las invenciones de patentes de 521 empresas de propiedad estatal y las emparejamos las de las empresas de propiedad privada durante 16 años, en 43 países y 22 industrias. Encontramos apoyo empírico a nuestras hipótesis basadas en un sólido conjunto de análisis de regresión de efectos fijos, ayudados por una batería de comprobaciones para evaluar la autoselección y el sesgo variable omitido.

Resumo

Neste artigo, examinamos os méritos relativos da propriedade estatal (SOE) e privada (POE) na geração de invenções por parte da empresa tanto em economias emergentes quanto em desenvolvidas. A propriedade estatal-privada oferece um veículo pelo qual governos em todo o mundo incentivam investimentos arriscados em novos vias tecnológicas. No entanto, sob um ponto de vista da teoria da agência tradicional, SOEs são atormentadas por incentivos de baixa capacidade e envolvimento disfuncional (por exemplo, orçamentos desnecessários e intromissões políticas) que reduzem o desempenho de SOE em relação a POEs. Para examinar esse paradoxo, construímos um modelo de agência estendido que, em vez de ignorar determinantes do custo da agência, oferece uma visão mais equilibrada, onde esses chamados “passivos” da agência de fato beneficiam SOEs, particularmente na esfera das invenções. Argumentamos que, dados os níveis relativamente mais altos de autonomia gerencial, SOEs podem superar em desempenho POEs em alguns tipos de resultados inventivos. Propomos ainda que relevantes condições de contorno operam para modificar esse efeito básico, no sentido que contextos em que não há restrições políticas – uma condição encontrada na maioria das economias emergentes – aumentam o risco de intromissão política, reduzindo a autonomia gerencial de forma que quaisquer vantagens inventivas da SOE diminuem significativamente. Também levantamos a hipótese de que esse efeito negativo de instituições fracas é atenuado em setores de alta produtividade inventiva. Empiricamente, monitoramos a frequência, o pioneirismo e o impacto de invenções patenteadas de 521 SOEs e correspondentes POEs por 16 anos, em 43 países e 22 indústrias. Encontramos suporte empírico para nossas hipóteses com base em um conjunto robusto de análises de regressão de efeitos fixos auxiliado por uma bateria de verificações para avaliar auto seleção e viés variável omitida.

摘要

在本文中 我们研究了新兴经济体和发达经济体的国有企业(SOE)和私有企业(POE)所有权对公司发明产出的相对优点。公司的国家所有权提供了一种使世界各国政府鼓励对新技术路径进行风险投资的手段。然而, 从传统代理理论的角度来看, 相对于POE而言, SOE受到激励动力不足和功能失调(例如预算浪费和政治干预)的困扰, 这降低了SOE的绩效。为了研究这个悖论, 我们建了一个扩展的代理模型, 不是忽略代理成本的动因, 而是采用了更为平衡的观点, 这些所谓的代理 “劣势” 实际上使国有企业受益, 特别是在发明领域。我们认为, 鉴于相对高的管理自治, 在某些类型的发明产出中SOE可能胜过POE。我们进一步提出, 在缺乏政治约束的情境下(大多数新兴经济体都有这种情况), 关键的边界条件可改变这种基础影响, 增加政治干预的风险, 减少管理自治, 因而任何SOE的发明优势都会显著减弱。我们还假设, 薄弱制度的这种负面影响在高发明生产率部门得到缓解。实证上, 我们追踪了为期16年覆盖43个国家22个行业的521家SOE和相配的POE的专利发明频率、开拓性和影响力。基于一组稳健的固定效应的回归分析, 借助一系列检查来评估自我选择和遗漏变量偏差, 我们发现了对我们假设的实证支持。

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Acknowledgements

Research assistance for this project was provided by Pedro Makhoul, Rodrigo Soares de Moura de Paula Arruda, and Ana Luiza Fonseca Minardi. Funding came from Harvard Business School, Brandeis University, Insper, and INSEAD. The authors are grateful for suggestions and feedback from Alvaro Cuervo-Cazurra, Ben Gomes-Casseres, Paola Criscuolo, Witold Henisz, Ilze Kivleniece, Thomas Klueter, Juan Ma, Klaus Meyer, Markus Perkman, Francisco Polidoro, Michael Witt, as well as comments from conference participants at the Academy of International Business in New Orleans, the Academy of Management in Anaheim, the Strategic Management Society in Berlin, the Sumantra Ghoshal Conference at the London Business School, the Management Seminar at ITAM in Mexico City, and the Brown Bag meeting at Brandeis University International Business School the Salisbury Reading Group.

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Lazzarini, S.G., Mesquita, L.F., Monteiro, F. et al. Leviathan as an inventor: An extended agency model of state-owned versus private firm invention in emerging and developed economies. J Int Bus Stud 52, 560–594 (2021). https://doi.org/10.1057/s41267-020-00327-9

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Keywords

  • state-owned enterprises
  • agency theory
  • managerial autonomy
  • emerging markets
  • invention performance
  • political constraints