The New Lyrics of the Old Folks: The Role of Family Ownership in Corporate Innovation

72 Pages Posted: 2 Mar 2015

See all articles by Po-Hsuan Hsu

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance

Sterling Huang

Singapore Management University - School of Accountancy

Massimo Massa

INSEAD - Finance

Hong Zhang

Tsinghua University - PBC School of Finance

Date Written: March 2015

Abstract

According to conventional wisdom, family ownership, which signals a lack of social capital and trust in an economy, may impede innovation. This argument, however, fails to recognize that modern family firms can benefit from capitalist institutions that promote innovation. Using a comprehensive sample of U.S. family-owned public firms and patents for the period from 1998 to 2010, we show that family ownership plays multiple roles in promoting innovation and its influence can be attributed to reduced financial constraints, a greater commitment to long-term value, and improved corporate governance. Causality is confirmed through an instrumental variable analysis, a difference-in-difference analysis based on an exogenous regulatory shock and a matched sample analysis.

Keywords: Family firms, innovation, intangible investment

JEL Classification: G32, O32

Suggested Citation

Hsu, Po-Hsuan and Huang, Sterling and Massa, Massimo and Zhang, Hong, The New Lyrics of the Old Folks: The Role of Family Ownership in Corporate Innovation (March 2015). CEPR Discussion Paper No. DP10445. Available at SSRN: https://ssrn.com/abstract=2572423

Po-Hsuan Hsu (Contact Author)

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

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

Sterling Huang

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore
6808 7929 (Phone)

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Hong Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

HOME PAGE: http://eng.pbcsf.tsinghua.edu.cn/content/details167_7995_x.html

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