Innovation Strategy of Private Firms

54 Pages Posted: 12 Mar 2014 Last revised: 16 Aug 2017

See all articles by Huasheng Gao

Huasheng Gao

Fanhai International School of Finance, Fudan University

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

Kai Li

University of British Columbia (UBC) - Sauder School of Business; China Academy of Financial Research (CAFR)

Date Written: May 10, 2017

Abstract

We compare innovation strategies of public and private firms based on a large sample over the period 1997-2008. We find that public firms’ patents rely more on existing knowledge, are more exploitative, and are less likely in new technology classes, while private firms’ patents are broader in scope and more exploratory. We investigate whether these strategies are due to differences in firm information environments, CEO risk preferences, firm life cycles, corporate acquisition policies, or investment horizons between these two groups of firms. Our evidence suggests that the shorter investment horizon associated with public equity markets is a key explanatory factor.

Keywords: innovation strategy; exploratory innovation; exploitative innovation; investment horizons; private firms; public firms

JEL Classification: G32, O32

Suggested Citation

Gao, Huasheng and Hsu, Po-Hsuan and Li, Kai, Innovation Strategy of Private Firms (May 10, 2017). Available at SSRN: https://ssrn.com/abstract=2407075 or http://dx.doi.org/10.2139/ssrn.2407075

Huasheng Gao

Fanhai International School of Finance, Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China
2165642222 (Phone)
2165642222 (Fax)

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

Kai Li (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~kaili

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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