Government Share Ownership and Innovation: Evidence from European Listed Firms

62 Pages Posted: 28 Mar 2018 Last revised: 6 Jun 2022

See all articles by Bernardo Bortolotti

Bernardo Bortolotti

Bocconi University; University of Turin

Veljko Fotak

School of Management, University at Buffalo (SUNY); Sovereign Investment Lab, Baffi Carefin, Bocconi University

Brian Wolfe

University of Texas at San Antonio

Date Written: May 29, 2022

Abstract

We investigate the impact of government ownership on the innovativeness of European listed firms. We find that firms with minority government stakes invest more in research and development (R&D) than private firms, thanks to relaxed financial constraints. However, firms with majority government stakes invest less due to short-term political priorities distorting managerial objectives and incentives. Our results are robust to propensity score matching and instrumental variables to account for omitted variable bias and the endogenous nature of government ownership. On the output side, despite the higher investment in R&D, minority government ownership has no discernable impact on patent quantity and quality, as measured by citations. Our results indicate that government ownership is not an efficient policy to promote innovation in listed firms.

Keywords: Innovation, R&D, state ownership

JEL Classification: G32, G15, G38

Suggested Citation

Bortolotti, Bernardo and Fotak, Veljko and Wolfe, Brian, Government Share Ownership and Innovation: Evidence from European Listed Firms (May 29, 2022). BAFFI CAREFIN Centre Research Paper No. 2018-72, Available at SSRN: https://ssrn.com/abstract=3150280 or http://dx.doi.org/10.2139/ssrn.3150280

Bernardo Bortolotti (Contact Author)

Bocconi University ( email )

Via Sarfatti 25
Milan, MI 20136
Italy

University of Turin

Via Po 53
Torino, Turin - Piedmont 10100
Italy

Veljko Fotak

School of Management, University at Buffalo (SUNY) ( email )

School of Management, University at Buffalo
236 Jacobs Management Center
Buffalo, NY 14260
United States
+1 716-645-1541 (Phone)

Sovereign Investment Lab, Baffi Carefin, Bocconi University ( email )

Via Roentgen 1
Milan
Italy

Brian Wolfe

University of Texas at San Antonio ( email )

San Antonio, TX 78249
United States

HOME PAGE: http://sites.google.com/view/brian-wolfe/home

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