Innovation: The Bright Side of Common Ownership?

30 Pages Posted: 16 Jan 2018 Last revised: 25 Sep 2018

See all articles by Miguel Anton

Miguel Anton

University of Navarra, IESE Business School

Florian Ederer

Yale School of Management; Yale University - Cowles Foundation

Mireia Gine

IESE Business School, University of Navarra ; The University of Pennsylvania

Martin C. Schmalz

University of Oxford - Finance; CEPR; CESifo; European Corporate Governance Institute (ECGI)

Date Written: June 21, 2018

Abstract

A firm's incentives to innovate deteriorate when other firms benefit from its R&D activities without incurring a cost. We show under which conditions common ownership of firms can mitigate this impediment to corporate innovation, and test the model's empirical predictions. Common ownership increases R&D when technological spillovers, as measured by firms' distance in technology space, are large relative to product market spillovers, as measured the firms' distance in the product market. Otherwise, costly innovation leads to more business stealing which is detrimental for common owners. Our results help inform the debate about the drivers of declining corporate R&D and the welfare effects of increased levels of common ownership concentration of U.S. firms.

Keywords: common ownership, competition, innovation, R&D

JEL Classification: O31, L20, L40

Suggested Citation

Anton, Miguel and Ederer, Florian and Gine, Mireia and Schmalz, Martin C., Innovation: The Bright Side of Common Ownership? (June 21, 2018). Available at SSRN: https://ssrn.com/abstract=3099578 or http://dx.doi.org/10.2139/ssrn.3099578

Miguel Anton

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Florian Ederer

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States

HOME PAGE: http://faculty.som.yale.edu/florianederer/

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Mireia Gine

IESE Business School, University of Navarra ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

The University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Martin C. Schmalz (Contact Author)

University of Oxford - Finance ( email )

United States

CEPR ( email )

London
United Kingdom

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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