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Common ownership and corporate innovation strategy
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Xian Chen 
, Sanjib Guha , Tahsina Haque Simu
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
It is empirically challenging to test the effect of common ownership on corporate innovation as the observed impact of common ownership on corporate innovation is a net effect due to two offsetting powers: technological spillover and market stealing. This paper tends to mitigate that issue by investigating the impact of common ownership on the strategic features of corporate innovation. We analyze the effect of common ownership on corporate innovation activities using stacked difference-in-differences analyses based on events of financial institutional mergers and acquisitions. We find no significant effect of common ownership on research and development (R&D) expenditures, patent applications, and citations, whereas we find a positive effect of common ownership on exploitative innovation strategy. Our findings suggest that the weak market-stealing effect of exploitative innovation incentivizes common owners to encourage a higher weight of exploitative innovation among innovation outputs. Our study contributes to the current literature in three ways. First, it provides new evidence of the anti-competitive effect of common ownership. Second, it empirically examines competing theoretical predictions of common ownership impacts on corporate innovation. Third, it identifies common ownership as one of the determinants for variations of innovation strategy.
Keywords: Corporate Ownership, Financial Institutions, Corporate Innovation
Authors’ individual contribution: Conceptualization — X.C., S.G., and T.H.S.; Methodology — X.C., S.G., and T.H.S.; Formal Analysis — X.C.; Writing — X.C.; Visualization — X.C.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: G20, G32, O32
Received: 31.10.2023
Accepted: 14.02.2024
Published online: 15.02.2024
How to cite this paper: Chen, X., Guha, S., & Haque Simu, T. (2024). Common ownership and corporate innovation strategy. Corporate Ownership & Control, 21(1), 82–95. https://doi.org/10.22495/cocv21i1art8
