Title: Which institutional investors encourage R&D investments?

Authors: Sami Gharbi; Hidaya Othmani

Addresses: Faculty of Law, Management and Economics of Jendouba, VPNC Laboratory, University of Jendouba, Campus Universitaire, Avenue du Maghreb Arabe 8100 Jendouba, Tunisia ' Faculty of Law, Management and Economics of Jendouba, VPNC Laboratory, University of Jendouba, Campus Universitaire, Avenue du Maghreb Arabe 8100 Jendouba, Tunisia

Abstract: The extant literature has examined the role of institutional investors on influencing corporate strategies, yet it has overlooked the distinct incentives and motives of these institutions. The purpose of this paper is to investigate the relationship between R&D investment and institutional investors' ownership taking into account their heterogeneous behaviours. Based on a sample of French high-tech firms, the authors estimate a panel data design with the generalised method of moments (GMM) to account for the unobserved heterogeneity and the dynamic nature of the panel data. The results show that the effects of institutional investors on R&D investment differ according to their types. Pressure-sensitive institutional investors (institutions with potential business relationship with the investee firms), and mainly banks, are negatively associated with R&D investment intensity. Conversely, pressure-insensitive institutional investors and mainly pension funds are positively associated with R&D. The results highlight the role of institutional ownership on R&D decisions and encourage firms to attract pressure-insensitive institutional investors to promote innovation and long term performance.

Keywords: R&D; research and development; innovation management; high tech companies; corporate governance; institutional investors; shareholder activism; dynamic panel data; generalised method of moments; GMM.

DOI: 10.1504/IJMED.2022.125779

International Journal of Management and Enterprise Development, 2022 Vol.21 No.3, pp.241 - 262

Received: 29 Aug 2021
Accepted: 02 Jan 2022
Published online: 28 Sep 2022 *

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