The Influence Of Institutional Investors On Corporate Innovation

Innovation is important drive to improve productivity and overall national strength.It is also imperative for our country to sustainable economic growth.Listed company,as the subject of a market economy,is the backbone of national innovation capacity.However,enterprises' innovation capability is still at a low level.How to improve the enterprise's innovation capability has become a serious problem.Corporate innovation needs corporate governance to integrate resources: talent,capital,information and technology.Recently,the capital market has begun to concern about corporate innovation activity.Capital market has an effect on corporate innovation capability and the willingness of business innovation: on the one hand,the capital market provides money and human capital support for enterprises' innovation to improve corporate innovation ability;on the other hand,the development of capital markets attracts more and more investors with different features to actively get involved in corporate governance.Institutional investors are important participants in capital markets.The effect of institutional investors on the corporate innovation cannot be ignored.According to the above background,this paper examines the relationship between institutional investors and corporate innovation using the data of 1,352 Chinese listed companies from 2007 to 2014 based on the theory of shareholder activism.The results show that overall institutional ownership,investment funds and the long-term investment funds have a positive impact on corporate innovation.The short-term investment funds have no significant influence on innovation.Furthermore,we find that there is an inverted U-shaped relationship between the degree of product market competition and corporate innovation.Finally,overall institutional ownership has more significant effect on corporate innovation in the non-state-owned enterprises than in state-owned enterprises.The ownership of state-owned shareholders restricts the positive role of institutional investors to a certain extent.The findings indicate that institutional investors play a positive role in promoting enterprises innovation,while the type of institutional investors,product market competition and the nature of enterprises ownership have a moderating effect on this relationship.The conclusions of this paper have some enlightenment to policy makers and researchers.