Innovation: The Bright Side of Common Ownership?

59 Pages Posted: 5 Mar 2024 Last revised: 18 Mar 2024

See all articles by Miguel Anton

Miguel Anton

University of Navarra, IESE Business School

Florian Ederer

Boston University - Markets, Public Policy, and Law; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Mireia Giné

University of Navarra, IESE Business School

Martin C. Schmalz

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

Multiple version iconThere are 2 versions of this paper

Date Written: March 2024

Abstract

Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture the full surplus of its innovations. We show that common ownership of firms mitigates this impediment to corporate innovation. By contrast, without technological spillovers, innovation has the effect of stealing market share from rivals; in that case, more common ownership reduces innovation. Empirically, the association between common ownership and innovation inputs and outputs decreases with product market proximity and increases with technology proximity. The sign and magnitude of the overall relationship between common ownership and corporate innovation thus varies considerably across the universe of firms depending on their relative proximity in technology and product market space. These results persist if we use only variation from BlackRock's acquisition of BGI. Our results inform the debate about the welfare effects of increasing common ownership among U.S. corporations.

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Suggested Citation

Anton, Miguel and Ederer, Florian and Giné, Mireia and Schmalz, Martin C. and Schmalz, Martin C., Innovation: The Bright Side of Common Ownership? (March 2024). NBER Working Paper No. w32192, Available at SSRN: https://ssrn.com/abstract=4746803

Miguel Anton (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Florian Ederer

Boston University - Markets, Public Policy, and Law ( email )

Boston, MA
United States

National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mireia Giné

University of Navarra, IESE Business School ( email )

Martin C. Schmalz

CEPR ( email )

London
United Kingdom

University of Oxford - Finance ( email )

United States

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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