The Impact Of Common Ownership On Corporate Innovation

Science and technology innovation is a matter of national luck.The contribution of China’s science and technology innovation to economic growth has exceeded 60%,and an innovative economic pattern has been initially formed.In the fiercely competitive market environment,innovation is the core competitiveness of enterprises to survive,and enterprises must innovate if they want to survive.However,in the context of the general separation of operation and ownership of modern enterprises,the principal-agent problem often becomes a key factor limiting enterprise innovation.In order to alleviate the principal-agent problem,listed companies will establish supervision and incentive mechanisms to restrain the behavior of management or to align the goals of management with those of shareholders,so that executives will focus on their own interests while also focusing on the long-term development of the enterprise,and enhance the motivation of executives to innovate.In recent years,the phenomenon of common ownership in global capital markets has gradually increased.The existing literature finds that common ownership will have an impact on the firm in two ways.On the one hand,common ownership will bring about governance synergies,which will enhance the governance level of the firm and increase its resources;on the other hand,common ownership will also bring about competitive collusion.In order to pursue portfolio value maximization,common ownership have an incentive to facilitate collusion among firms in the same industry and form monopolistic alliances,which will weaken market competition and thus have an impact on the market economy.The influence of common ownership is likely to affect firms’ innovation decisions,but little literature has examined the relationship between common ownership and firm innovation.In this paper,we analyze the impact of common ownership on corporate innovation by combining the principal-agent theory and incentive theory with the hypothesis of "competitive collusion" and "governance synergy" of common ownership in A-share listed companies from 2007 to 2020.By designing unbalanced panel data and regressing the model after fixing the year and industry effects,the results show that common ownership have a positive effect on corporate innovation and help to improve the level of corporate innovation,specifically,within a certain number of range,the more the number of common ownership,the stronger corporate innovation,which verifies that the influence of common ownership on corporate innovation is based on This verifies that the influence of common ownership on corporate innovation is dominated by"governance synergy".Through further mechanism analysis,it is found that common ownership will improve corporate innovation from two aspects:on the one hand,the governance experience brought by common ownership will reduce the agency cost of the enterprise,thus alleviating the principal-agent problem and making corporate innovation increase;on the other hand,common ownership will provide incentives to the management and prevent the short-sighted behavior of the management,thus promoting corporate innovation.In addition,the heterogeneity analysis of property rights and industry attributes shows that the positive effect of common ownership on firm innovation inputs is more pronounced in non-state owned enterprises;in technology-intensive enterprises,the positive effect of common ownership on both firm innovation inputs and outputs is more pronounced.The findings of this paper provide an explanation for understanding the increase of corporate innovation in Chinese firms in terms of chain shareholder governance synergy,which is important for firms to actively explore to enhance their market value and promote the high-quality development of China’s economy.The innovation of this paper is mainly reflected in three aspects: First,the research perspective is novel.Most of the existing literature studies the impact on corporate innovation from two aspects of corporate internality and externality,but lacks to study the impact on corporate innovation from the perspective of shareholders and common ownership,this paper explores the impact of common ownership on corporate innovation from the perspective of common ownership,which enriches the perspective of studying corporate innovation,and also Second,common ownership may have opposite effects on corporate innovation from two aspects.This paper verifies that common ownership will promote corporate innovation and explains it in terms of governance synergy,which enriches the relevant research on common ownership’governance synergy and provides empirical support for common ownership to have governance synergy.