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Decision rights allocation and innovation: Evidence from China's listed business groups

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  • Lou, Zhukun
  • Zhu, Mingyang

Abstract

This study investigates the impact of decision rights allocation in business groups on innovation performance. Using a sample of A-share manufacturing listed companies in China for 2009–2017, we find that group centralization has an inverted U-shaped relationship with innovation performance. This result suggests that moderate centralization is conducive to improving a group's innovation performance. Further, we determine that the relationship between group centralization and innovation performance varies according to the nature of ownership, growth opportunities, and market competition. State-owned property and growth opportunities of a group negatively moderate the relationship between group centralization and innovation performance; market competition positively moderates that relationship.

Suggested Citation

  • Lou, Zhukun & Zhu, Mingyang, 2021. "Decision rights allocation and innovation: Evidence from China's listed business groups," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320301197
    DOI: 10.1016/j.frl.2020.101572
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    Cited by:

    1. Liu, Yini, 2023. "Does innovation success reduce the cost of financing? Evidence from private investments in public equity," Finance Research Letters, Elsevier, vol. 52(C).
    2. Rumeng Cui & Zhong Ma & Longfeng Wang, 2022. "Allocation of Decision Rights and CSR Disclosure: Evidence from Listed Business Groups in China," Sustainability, MDPI, vol. 14(7), pages 1-20, March.
    3. Li, Na & Wu, Di, 2024. "Cross-shareholding, financing constraints and firm innovation efficiency," Finance Research Letters, Elsevier, vol. 62(PA).
    4. Lin, Nan & Chen, Han & Zhang, Pengdong & Liu, Weiqian, 2022. "Does gambling culture affect firms’ investment efficiency?," Finance Research Letters, Elsevier, vol. 49(C).
    5. Tang, Le & Sun, Shiyu, 2021. "How does leader self-deprecating humor affect creative performance? The role of creative self-efficacy and power distance," Finance Research Letters, Elsevier, vol. 42(C).
    6. Lin, Xiaowei & Zhang, Qihao & Chen, Aihua & Zhang, Pengdong, 2022. "The Bright Side of Financial Constraint on Corporate Innovation: Evidence from the Chinese Bond Market," Finance Research Letters, Elsevier, vol. 49(C).

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    More about this item

    Keywords

    Business groups; Centralization; Innovation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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