Ownership Structure and Innovation: An Emerging Market Perspective

23 Pages Posted: 21 Dec 2008 Last revised: 5 Apr 2015

See all articles by Victor Zitian Chen

Victor Zitian Chen

University of North Carolina, Charlotte; University of North Carolina (UNC) at Charlotte - The Belk College of Business Administration

Jing Li

Simon Fraser University

Daniel M. Shapiro

Simon Fraser University (SFU) - Policy Analysis Area

Xiaoxiang Zhang

University of Newcastle (Australia) - Newcastle Business School

Date Written: October 22, 2012

Abstract

Considerable attention has been focused on the ways in which emerging market firms can obtain and mobilize the knowledge and resources required for innovation. Innovation is a particular challenge in emerging markets because of inadequate external institutions. In this study, we focus on the importance of ownership structure, and in particular on ownership type diversity and ownership concentration. Using transaction cost and agency theories embedded in an emerging market context, we argue that ownership structure provides an important mechanism by which firms can assemble and direct the resources necessary for innovation in the context of inadequate external institutions. Specifically, we hypothesize that ownership type diversity improves innovation performance and that increasing ownership concentration has the same effect, but only up to a point. Using a self-tailed panel data of 487 and 475 Chinese listed companies during 2004-2005 and 2005-2006 respectively, we find supportive empirical evidence for our hypotheses. Our findings also suggest ownership type diversity has a more significant statistical effect on innovation performance than does ownership concentration, although most of the extant literature focuses on the latter.

Keywords: ownership type, ownership concentration, innovation, emerging markets

JEL Classification: D24, F23, G32, H82, L21, M10, M11, O23, P31

Suggested Citation

Chen, Victor Zitian and Li, Jing and Shapiro, Daniel and Zhang, Xiaoxiang, Ownership Structure and Innovation: An Emerging Market Perspective (October 22, 2012). Asia Pacific Journal of Management, 31(1), 1-24, 2014 (Lead article).. Available at SSRN: https://ssrn.com/abstract=1299737 or http://dx.doi.org/10.2139/ssrn.1299737

Victor Zitian Chen (Contact Author)

University of North Carolina, Charlotte ( email )

The Belk College of Business
Charlotte, NC 28223

HOME PAGE: http://www.ChenZitian.com/

University of North Carolina (UNC) at Charlotte - The Belk College of Business Administration ( email )

The Belk College of Business
Charlotte, NC 28223

HOME PAGE: http://www.ChenZitian.com/

Jing Li

Simon Fraser University ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Daniel Shapiro

Simon Fraser University (SFU) - Policy Analysis Area ( email )

Room 2400 - 515 West Hastings St.
Burnaby, British Columbia V5A 1S6
Canada
604-291-5155 (Phone)
604-291-5122 (Fax)

Xiaoxiang Zhang

University of Newcastle (Australia) - Newcastle Business School ( email )

City Campus East – 231
Newcastle-Upon-Tyne NE1 8ST
United Kingdom

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