Document Type

Article

Publication Date

1-2021

Publisher

Emerald

Source Publication

Managerial Finance

Source ISSN

0307-4358

Abstract

Purpose

The purpose of this paper is to examine the impact of common ownership on corporate innovation, including innovation input, innovation output and postgrant patents.

Design/methodology/approach

This paper uses the ordinary least square model and the difference-in-differences technique to evaluate the effect of institutional interlocking shareholdings on the life cycle of corporate innovation.

Findings

The results show that common ownership impedes innovation measured by patent grants and citations through reduced R&D expenditures. However, common ownership protects postgrant patents by lowering the likelihood that a co-owned firm gets involved in patent litigation and by accelerating the settlement of lawsuits between co-owned firms.

Practical implications

From a regulatory perspective, common ownership in younger firms that rely heavily on R&D investment to produce innovation outputs is detrimental and needs to be regulated. However, common ownership in mature firms, which hold a big pool of patents or rely on acquiring patents to compete, is of less concern because of the protective role detected.

Originality/value

The paper provides a first comprehensive look into how same-industry common ownership affects innovation input, innovation output and postgrant patents. The research also reconciles the anticompetitive effect and the coordinative effect of common ownership documented in the literature.

Comments

Accepted version. Managerial Finance, Vol. 47, No. 2 (January 2021): 145-166. DOI. © 2021 Emerald. Used with permission.

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