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

17 Pages Posted: 7 Jan 2017 Last revised: 26 Dec 2018

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

University of Valladolid - Department of Financial Economics 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 2017

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.

Suggested Citation

Lopez-Iturriaga, Felix Javier and López-Millán, Emilio, Institutional Framework, Corporate Ownership Structure, and R&D Investment: An International Analysis (January 2017). R&D Management, Vol. 47, Issue 1, pp. 141-157, 2017. Available at SSRN: https://ssrn.com/abstract=2894664 or http://dx.doi.org/10.1111/radm.12204

Felix Javier Lopez-Iturriaga (Contact Author)

University of Valladolid - Department of Financial Economics and Accounting ( email )

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

HOME PAGE: http://www2.eco.uva.es/flopez

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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