Title: Effects of institutional investor ownership on innovation

Authors: Geeta Rani Duppati; Anne Christine D'Arcy; Robert Faff; Neha Matlani

Addresses: Waikato Management School, University of Waikato, Hillcrest Road, Hillcrest, Hamilton 3240, New Zealand ' Institute for Corporate Governance, Vienna University of Economics and Business, Welthandelsplatz 1, AT 1020 Vienna, Austria ' School of Business, The University of Queensland, Colin Clark, 39 Blair Dr, St Lucia QLD 4067, Australia; Bond University, 14 University Dr, Robina QLD 4226, Australia ' Singapore Management University, 81 Victoria St., 188065, Singapore

Abstract: This study examines the effects of institutional investor ownership (IIO) on innovation. First, we investigate whether IIO influences firm innovation. Second, we examine whether the stage of economic development influences the effects of IIO on innovation. Then we further investigate the role of IIO type and country level governance and legal framework on the relationship between the IIO and innovation in OECD and emerging economies. Using panel data of firms listed on the NYSE/NASDAQ, we find that the institutional investors significantly increase firm innovation. Our results further show that country-level governance and legal system interact with institutional ownership and affect corporate innovation. We find that country-level governance and legal system are the important institutional features that affect the relationship between institutional ownership and innovation. Furthermore, IIO in developed economies with common law traditions affects innovation positively and civil law traditions work well for developing economies.

Keywords: institutional ownership; innovation; economic development.

DOI: 10.1504/IJCG.2022.124785

International Journal of Corporate Governance, 2022 Vol.13 No.1, pp.1 - 26

Received: 14 Jul 2021
Accepted: 03 Mar 2022
Published online: 08 Aug 2022 *

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