Institutional framework,corporate ownership structure,and R&D investment: an international analysis |
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Authors: | Félix J López Iturriaga Emilio J López-Millán |
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Institution: | University of Valladolid, Avda. Valle del Esgueva 6, 47011 Valladolid, Spain |
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Abstract: | We combine agency theory with the law and finance approach to analyze how the legal protection of investors and the corporate ownership structure affect corporate investment in research and development (R&D). We use information from 956 firms from the five most R&D-intensive industries in 19 developed countries. Our results show that better protection of investors’ rights by the institutional environment has a positive influence on corporate R&D. We also find that corporate ownership concentration works as a substitute for legal protection. This finding means that R&D investment of the firms in the countries with poor legal protection increases as ownership becomes more concentrated. Our results also show that the identity of shareholders has a relevant effect: Whereas banks and nonfinancial institutions as shareholders result in lower R&D, institutional investors as shareholders increase corporate investment in R&D. |
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