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The effect of labor unions on innovation and market valuation in business group affiliations: new evidence from South Korea

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Listed:
  • Ilhang Shin

    (Gachon University)

  • Sorah Park

    (Ewha Womans University)

  • Seong Pyo Cho

    (Kyungpook National University)

  • Seungho Choi

    (Ewha Womans University)

Abstract

This paper examines how non-financial stakeholders, especially labor unions, affect firms’ innovation in business group affiliations. Using firm-level labor union data unique to Korea, we find that firms’ innovation activities are negatively related to unionization. This negative relationship is more pronounced for large business groups, suggesting that Korean chaebols are more concerned with the influence of powerful stakeholders—union workers. Also, equity market valuation of R&D reduction under union pressure is not negative for chaebol-affiliated firms, whereas it is negative for non-affiliated firms. These results indicate that the equity market perceives that chaebols’ internal capital market facilitates group-oriented R&D investment decisions.

Suggested Citation

  • Ilhang Shin & Sorah Park & Seong Pyo Cho & Seungho Choi, 2020. "The effect of labor unions on innovation and market valuation in business group affiliations: new evidence from South Korea," Asian Business & Management, Palgrave Macmillan, vol. 19(2), pages 239-270, April.
    • Handle: RePEc:pal:abaman:v:19:y:2020:i:2:d:10.1057_s41291-019-00089-9
    DOI: 10.1057/s41291-019-00089-9
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    2. Ilhang Shin & Sorah Park, 2020. "Role of Foreign and Domestic Institutional Investors in Corporate Sustainability: Focusing on R&D Investment," Sustainability, MDPI, vol. 12(20), pages 1-13, October.

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