How Do Foreign Institutional Investors Enhance Firm Innovation?

2017/07/25 by Hoang Luong, Fariborz Moshirian, Lily Nguyen +2 · 4 citations
Business, Management and Accounting · Computer Science · #Corporate Finance and Governance #Economic Growth and Development #International Business and FDI

paper · doi:10.1017/s0022109017000497

Abstract

We examine the effect of foreign institutional investors on firm innovation. Using firm-level data across 26 non-U.S. economies between 2000 and 2010, we show that foreign institutional ownership has a positive, causal effect on firm innovation. We further explore three possible underlying mechanisms through which foreign institutions affect firm innovation: Foreign institutions act as active monitors, provide insurance for firm managers against innovation failures, and promote knowledge spillovers from high-innovation economies. Our article sheds new light on the real effects of foreign institutions on firm innovation.

Citations

• Takeover Threats and Managerial Myopia
• Large Shareholders and Corporate Control
• Enjoying the Quiet Life? Corporate Governance and Managerial Preferences

Cited by

• Unleashing creative potential: The role of stable institutional ownership in exploratory innovation
• The effects of institutional investors and their contestability on firm innovation: Evidence from Chinese listed firms
• Who is financing corporate green innovation?
• Elite Patronage and Firm Innovation in China

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