The Ownership Concentration - Innovation Nexus: Evidence from SMEs around The World
Emerging Markets Finance and Trade
37 Pages Posted: 15 Jun 2020 Last revised: 22 Nov 2021
Date Written: May 20, 2020
This study investigates whether ownership concentration improves or impedes firm innovation using a sample of small and medium-sized enterprises (SMEs) spanning 95 countries worldwide. We find that higher ownership concentration is associated with a lower likelihood of introducing innovative activities. Further, results reveal that concentrated ownership has detrimental impacts on innovation for firms with a higher degree of asymmetric information and firms led by less experienced managers. We also show that the negative association between ownership concentration and innovation only exists for financially constrained firms (i.e. younger enterprises and SMEs with high financing obstacles) and those with the highly concentrated ownership structure. Lastly, evidence suggests that institutional development alleviates the negative impact of ownership concentration on innovation.
Keywords: Innovation, SMEs, Ownership concentration
JEL Classification: O31, G32
Suggested Citation: Suggested Citation