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Aghion, Philippe,
John Van Reenen, and
Luigi Zingales. 2013. "Innovation and Institutional Ownership."
,
103(1): 277-304.
Show Article Details
DOI: 10.1257/aer.103.1.277
Abstract:We find that greater institutional ownership is associated with
more innovation. To explore the mechanism, we contrast the "lazy
manager" hypothesis with a model where institutional owners
increase innovation incentives through reducing career risks. The
evidence favors career concerns. First, we find complementarity
between institutional ownership and product market competition,
whereas the lazy manager hypothesis predicts substitution. Second,
CEOs are less likely to be fired in the face of profit downturns
when institutional ownership is higher. Finally, using instrumental
variables, policy changes, and disaggregating by type of institutional
owner, we argue that the effect of institutions on innovation is causal.
(JEL G23, G32, L25, M10, O31, O34)
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Authors:
Aghion, Philippe (Harvard U)
Van Reenen, John (CEP, London School of Economics and Political Science)
Zingales, Luigi (U Chicago)
JEL Classifications:
G23: Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
L25: Firm Performance: Size, Diversification, and Scope
M10: Business Administration: General
O31: Innovation and Invention: Processes and Incentives
O34: Intellectual Property Rights
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