Institutional Framework, Corporate Ownership Structure, and R&D Investment: An International Analysis

37 Pages Posted: 18 Jan 2015

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

Universidad de Valladolid - Department of Finance and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Emilio López-Millán

University of Valladolid

Multiple version iconThere are 3 versions of this paper

Date Written: January 17, 2015

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 the corporate investment in research and development (R&D). We use information from 1,091 firms from the five most R&D intensive industries in 19 developed countries. Our results show that the 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 the R&D investment of the firms in the countries with poor legal protection increases as long as the 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 the corporate investment in R&D.

Keywords: Institutional setting, ownership structure, corporate R&D, legal protection

JEL Classification: G32, O32

Suggested Citation

Lopez-Iturriaga, Felix Javier and López-Millán, Emilio, Institutional Framework, Corporate Ownership Structure, and R&D Investment: An International Analysis (January 17, 2015). Available at SSRN: https://ssrn.com/abstract=2551276 or http://dx.doi.org/10.2139/ssrn.2551276

Felix Javier Lopez-Iturriaga (Contact Author)

Universidad de Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Emilio López-Millán

University of Valladolid ( email )

8 C/Plaza de Santa Cruz
Valladolid, Valladolid 47002
Spain

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