Do Long‐Term Institutional Investors Foster Corporate Innovation?

33 Pages Posted: 19 Mar 2020

See all articles by Hyun‐Dong Kim

Hyun‐Dong Kim

Sungkyunkwan University

Kwangwoo Park

Korea Advanced Institute of Science and Technology (KAIST)

Kyojik Roy Song

Sungkyunkwan University

Date Written: June 2019

Abstract

This article examines the effect of institutional investors’ investment horizons on firms’ innovation activities. We conjecture that the presence of long‐term institutional investors mitigates managerial myopia, prompting firms to generate greater corporate innovation outputs. Using data on patents and patent citations for US firms, we find that institutions’ investment horizons are positively related to the number of patents and patent citations. We also document that long‐term (short‐term) institutional ownership is positively (negatively) related to the innovation outputs. This article makes an additional contribution to the corporate innovation literature by addressing the positive role of long‐term institutional investors.

Keywords: Innovation, Patent, Institutional investor, Investment horizon

Suggested Citation

Kim, Hyun‐Dong and Park, Kwangwoo and Roy Song, Kyojik, Do Long‐Term Institutional Investors Foster Corporate Innovation? (June 2019). Accounting & Finance, Vol. 59, Issue 2, pp. 1163-1195, 2019, Available at SSRN: https://ssrn.com/abstract=3556056 or http://dx.doi.org/10.1111/acfi.12284

Hyun‐Dong Kim (Contact Author)

Sungkyunkwan University

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

Kwangwoo Park

Korea Advanced Institute of Science and Technology (KAIST) ( email )

373-1 Kusong-dong
Yuson-gu
Taejon 305-701, 130-722
Korea, Republic of (South Korea)

Kyojik Roy Song

Sungkyunkwan University

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

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