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Firm innovation and ultimate control mechanism: Case of emerging market

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  • Ruqia Shaikh
  • Zhiqiang Li
  • Xiaoli Wang
  • Muhammad Rizwan Nazir

Abstract

This study analyzes the effect of control enhancing mechanisms (CEMs) on a firm's innovation activities. In the light of conflicting theoretical prophecies on the role of ultimate control, we analyze the ownership concentration by examining the cash flow and control rights deviation which embolden ultimate owners to expropriate. Empirical evidence suggests that CEMs have a negative effect on core and base innovation, although the effect is severe in intermediate aged firms and largest sized firms. These findings are robust in different specifications and have significant implications for policymakers.

Suggested Citation

  • Ruqia Shaikh & Zhiqiang Li & Xiaoli Wang & Muhammad Rizwan Nazir, 2022. "Firm innovation and ultimate control mechanism: Case of emerging market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(2), pages 440-456, March.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:2:p:440-456
    DOI: 10.1002/mde.3392
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