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Transparency and firm innovation

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  • Zhong, Rong (Irene)

Abstract

Firm innovation drives both firm competitiveness and economic growth. Constructing a novel firm-patent panel database from 29 countries, I find that transparency directly boosts innovative effort by reducing managerial career concerns. This effect operates through transparency's implicit contracting role: it reduces the sensitivity of management turnover to poor innovative output. Transparency also increases innovative efficiency through its governance role in facilitating efficient allocation of R&D capital. Nonetheless, the benefit of transparency is fully offset in environments with greater proprietary cost. These findings illuminate the unique roles and mechanisms of transparency in promoting innovation incentives and outcomes.

Suggested Citation

  • Zhong, Rong (Irene), 2018. "Transparency and firm innovation," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 67-93.
    • Handle: RePEc:eee:jaecon:v:66:y:2018:i:1:p:67-93
    DOI: 10.1016/j.jacceco.2018.02.001
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    More about this item

    Keywords

    R&D; Career concern; Management turnover; Implicit contracting; Proprietary cost; Corporate governance;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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