IDEAS home Printed from https://ideas.repec.org/p/uto/labeco/201502.html
   My bibliography  Save this paper

Corporate Governance, Innovation and Firm Age: Insights and New Evidence

Author

Listed:

Abstract

This paper investigates the relationship between corporate governance (CG) and innovation according to firms’ age by combining insights from the recent strand of contributions analysing CG and innovation with the lifecycle literature. We find a negative relationship between CG and innovation which is stronger for young firms than for mature ones. The empirical analysis is carried out on a sample of firms drawn from the ISSR isk Metrics database and observed over the period 2003 -2008. The parametric methodology provides results that are consistent with the literature and supports the idea that mature firms are better off than young ones. We check for possible non-linearities by implementing a non-parametric analysis and suggest that the negative relationship between CG and innovation is mostly driven by higher values of CG.

Suggested Citation

  • Bianchini, Stefano & Krafft, Jackie & Quatraro, Francesco & Ravix, Jacques, 2015. "Corporate Governance, Innovation and Firm Age: Insights and New Evidence," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201502, University of Turin.
    • Handle: RePEc:uto:labeco:201502
    as

    Download full text from publisher

    File URL: http://www.est.unito.it/do/home.pl/Download?doc=/allegati/wp2015dip/wp_4_2015.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
    2. Gustavo Manso, 2011. "Motivating Innovation," Journal of Finance, American Finance Association, vol. 66(5), pages 1823-1860, October.
    3. Julian Atanassov, 2013. "Do Hostile Takeovers Stifle Innovation? Evidence from Antitakeover Legislation and Corporate Patenting," Journal of Finance, American Finance Association, vol. 68(3), pages 1097-1131, June.
    4. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
    5. Lucian A. Bebchuk & Michael S. Weisbach, 2012. "The State of Corporate Governance Research," Springer Books, in: Sabri Boubaker & Bang Dang Nguyen & Duc Khuong Nguyen (ed.), Corporate Governance, edition 127, pages 325-346, Springer.
    6. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    7. William Lazonick, 2007. "The US stock market and the governance of innovative enterprise ," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(6), pages 983-1035, December.
    8. Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2014. "Corporate governance, value and performance of firms: new empirical results on convergence from a large international database," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(2), pages 361-397.
    9. Ross Levine, 2005. "Law, Endowments and Property Rights," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 61-88, Summer.
    10. Marianne Bertrand & Sendhil Mullainathan, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1043-1075, October.
    11. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    12. Vivian W. Fang & Xuan Tian & Sheri Tice, 2014. "Does Stock Liquidity Enhance or Impede Firm Innovation?," Journal of Finance, American Finance Association, vol. 69(5), pages 2085-2125, October.
    13. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    14. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    15. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374, National Bureau of Economic Research, Inc.
    16. Olivier Brossard & Stéphanie Lavigne & Mustafa Erdem Sakinç, 2013. "Ownership structures and R&D in Europe: the good institutional investors, the bad and ugly impatient shareholders," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(4), pages 1031-1068, August.
    17. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
    18. Stephane Lhuillery, 2011. "The impact of corporate governance practices on R&D efforts: a look at shareholders' rights, cross-listing, and control pyramid," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 20(5), pages 1475-1513, October.
    19. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    20. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    21. Jimmy A. Saravia, 2013. "The lifecycle of the firm, corporate governance and investment performance," Documentos de Trabajo de Valor Público 10927, Universidad EAFIT.
    22. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 107-156.
    23. Becker-Blease, John R., 2011. "Governance and innovation," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 947-958, September.
    24. Rafael La Porta & Florencio Lopez‐de‐Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    25. Igor Filatotchev & Steve Toms & Mike Wright, 2006. "The firm's strategic dynamics and corporate governance life-cycle," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(4), pages 256-279, September.
    26. Reena Aggarwal & Isil Erel & René Stulz & Rohan Williamson, 2010. "Differences in Governance Practices between U.S. and Foreign Firms: Measurement, Causes, and Consequences," The Review of Financial Studies, Society for Financial Studies, vol. 23(3), pages 3131-3169, March.
    27. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
    28. Zoltan J. Acs & David B. Audretsch, 2008. "Innovation, Market Structure, and Firm Size," Chapters, in: Entrepreneurship, Growth and Public Policy, chapter 2, pages 16-23, Edward Elgar Publishing.
    29. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    30. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    31. Martynova, Marina & Renneboog, Luc, 2011. "Evidence on the international evolution and convergence of corporate governance regulations," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1531-1557.
    32. Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2014. "Corporate governance, value and performance of firms: New empirical results on convergence from a large international database," Post-Print halshs-01072788, HAL.
    33. Driver, Ciaran & Guedes, Maria João Coelho, 2012. "Research and development, cash flow, agency and governance: UK large companies," Research Policy, Elsevier, vol. 41(9), pages 1565-1577.
    34. John E. Core & Wayne R. Guay & Tjomme O. Rusticus, 2006. "Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Investors' Expectations," Journal of Finance, American Finance Association, vol. 61(2), pages 655-687, April.
    35. James R. Brown & Gustav Martinsson & Bruce C. Petersen, 2013. "Law, Stock Markets, and Innovation," Journal of Finance, American Finance Association, vol. 68(4), pages 1517-1549, August.
    36. Baranchuk, Nina & Kieschnick, Robert & Moussawi, Rabih, 2014. "Motivating innovation in newly public firms," Journal of Financial Economics, Elsevier, vol. 111(3), pages 578-588.
    37. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
    38. O’Connor, Matthew & Rafferty, Matthew, 2012. "Corporate Governance and Innovation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(2), pages 397-413, April.
    39. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martínez Bobillo, Alfredo & Rodríguez Sanz, Juan Antonio & Tejerina Gaite, Fernando, 2021. "Explanatory and predictive drivers of entrepreneurial orientation and innovation capacity: Evidence from family enterprises," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    2. Alex Coad & Jacob Rubæk Holm & Jackie Krafft & Francesco Quatraro, 2018. "Firm age and performance," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 1-11, January.
    3. AlHares, Aws & Ntim, Collins & King, David, 2018. "Block Ownership and Companies' R&D Intensity: The Moderating Effect Of Culture," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 15(2), pages 19-32.
    4. Fabrizio Rossi & Richard J. Cebula, 2015. "Ownership Structure and R&D: An Empirical Analysis of Italian listed companies," PSL Quarterly Review, Economia civile, vol. 68(275), pages 297-326.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jackie Krafft & Yiping Qu & Francesco Quatraro & Jacques-Laurent Ravix, 2014. "Corporate governance, value and performance of firms: new empirical results on convergence from a large international database," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(2), pages 361-397.
    2. repec:hal:wpaper:hal-00786664 is not listed on IDEAS
    3. 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.
    4. Chen Lin & Sibo Liu & Gustavo Manso, 2021. "Shareholder Litigation and Corporate Innovation," Management Science, INFORMS, vol. 67(6), pages 3346-3367, June.
    5. Ciaran Driver & Maria João Coelho Guedes, 2017. "R&D and CEO departure date: do financial incentives make CEOs more opportunistic?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(5), pages 801-820.
    6. Xiao, Gang, 2013. "Legal shareholder protection and corporate R&D investment," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 240-266.
    7. Lucian A. Bebchuk & Michael S. Weisbach, 2012. "The State of Corporate Governance Research," Springer Books, in: Sabri Boubaker & Bang Dang Nguyen & Duc Khuong Nguyen (ed.), Corporate Governance, edition 127, pages 325-346, Springer.
    8. Fabrizio Rossi & Richard J. Cebula, 2015. "Ownership Structure and R&D: An Empirical Analysis of Italian listed companies," PSL Quarterly Review, Economia civile, vol. 68(275), pages 297-326.
    9. Ross Levine & Chen Lin & Lai Wei, 2017. "Insider Trading and Innovation," Journal of Law and Economics, University of Chicago Press, vol. 60(4), pages 749-800.
    10. Bruno, Valentina & Claessens, Stijn, 2010. "Corporate governance and regulation: Can there be too much of a good thing?," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 461-482, October.
    11. Balachandran, Balasingham & Duong, Huu Nhan & Luong, Hoang & Nguyen, Lily, 2020. "Does takeover activity affect stock price crash risk? Evidence from international M&A laws," Journal of Corporate Finance, Elsevier, vol. 64(C).
    12. Fabrizio Rossi & Richard J. Cebula, 2015. "Does the Board of Directors Affect the Extent of Corporate R&D? Evidence from Italian listed companies," Economics Bulletin, AccessEcon, vol. 35(4), pages 2567-2580.
    13. Connelly, J. Thomas & Limpaphayom, Piman & Nagarajan, Nandu J., 2012. "Form versus substance: The effect of ownership structure and corporate governance on firm value in Thailand," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1722-1743.
    14. Rizzo, Emanuele, 2018. "Essays on corporate governance and the impact of regulation on financial markets," Other publications TiSEM b5158260-ea13-4763-b992-6, Tilburg University, School of Economics and Management.
    15. Klapper, Leora F. & Love, Inessa, 2004. "Corporate governance, investor protection, and performance in emerging markets," Journal of Corporate Finance, Elsevier, vol. 10(5), pages 703-728, November.
    16. Z. Jun Lin & Shengqiang Liu & Fangcheng Sun, 2017. "The Impact of Financing Constraints and Agency Costs on Corporate R&D Investment: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 17(1), pages 3-42, March.
    17. Ferrell, Allen & Liang, Hao & Renneboog, Luc, 2016. "Socially responsible firms," Journal of Financial Economics, Elsevier, vol. 122(3), pages 585-606.
    18. Erwan Morellec & Boris Nikolov & Norman Schürhoff, 2018. "Agency Conflicts around the World," The Review of Financial Studies, Society for Financial Studies, vol. 31(11), pages 4232-4287.
    19. Schmid, Thomas & Ampenberger, Markus & Kaserer, Christoph & Achleitner, Ann-Kristin, 2010. "Controlling shareholders and payout policy: do founding families have a special 'taste for dividends'?," CEFS Working Paper Series 2010-01, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    20. Choi, Paul Moon Sub & Chung, Chune Young & Vo, Xuan Vinh & Wang, Kainan, 2020. "Are better-governed firms more innovative? Evidence from Korea," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 263-279.
    21. Ding, Wenzhi & Levine, Ross & Lin, Chen & Xie, Wensi, 2021. "Corporate immunity to the COVID-19 pandemic," Journal of Financial Economics, Elsevier, vol. 141(2), pages 802-830.

    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uto:labeco:201502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Piero Cavaleri or Marina Grazioli (email available below). General contact details of provider: https://edirc.repec.org/data/leifrit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.