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Corporate governance practices and companies’ R&D intensity: Evidence from European countries

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  • Honoré, Florence
  • Munari, Federico
  • van Pottelsberghe de La Potterie, Bruno

Abstract

This paper empirically investigates whether corporate governance practices implemented to align shareholders’ and managers’ interests affect the resources firms devote to R&D. Two databases – one on governance ratings and one on R&D investment – are merged to obtain a multi-country, multi-sector sample of 177 European companies involved in R&D activities. The results suggest that limitations of anti-takeover devices and voting rights restrictions, a financial performance-based remuneration system for managers and a higher shareholders’ consensus at the annual general assembly are all negatively correlated with R&D intensity. In other words, governance practices that are designed to respond to the short-term expectations of financial markets might prove to be detrimental to long-term R&D investments.

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  • Honoré, Florence & Munari, Federico & van Pottelsberghe de La Potterie, Bruno, 2015. "Corporate governance practices and companies’ R&D intensity: Evidence from European countries," Research Policy, Elsevier, vol. 44(2), pages 533-543.
    • Handle: RePEc:eee:respol:v:44:y:2015:i:2:p:533-543
    DOI: 10.1016/j.respol.2014.10.016
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    More about this item

    Keywords

    R&D intensity; Corporate governance; Remuneration; Shareholder rights;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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