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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 49, No. 5, pp.1129-1161
ISSN: 1226-1874 (Print)
Print publication date 31 Oct 2020
Received 23 Mar 2020 Revised 30 Jun 2020 Accepted 30 Jun 2020
DOI: https://doi.org/10.17287/kmr.2020.49.5.1129

기관투자가와 기업혁신

Jeongdae Yim ; Taeho Yang
(First Author) BK21 FOUR, College of Business Administration, Chonnam National University jeongdaeyim@gmail.com
(Corresponding Author) Daegu Regional Council for Human Resources Development, Daegu Chamber of Commerce & Industry loin053@naver.com
Institutional Investors and Firm Innovation: Evidence from Korea


Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We try to provide evidence on whether institutional investors induce managers to participate in firm innovation or to make myopic corporate policies by exploring the relationship between institutional ownership and firm innovation. Using manufacturing firms listed on two Korean stock markets from 2005 and 2017, we find positive relationships between institutional ownership and two innovation variables measured by the number of patent applications and the one minus the technological proximity. These relationships are robust even if we consider the fact that our two innovation measures have the non-negativetrivial portions of firms with zeros by estimating Tobit regressions and the number of patent applications has the nature of non-negative and count variable by using Poisson and negative binomial regressions. We also document robust results from eliminating the differences between characteristics of firms with versus without institutional ownership by a propensity score matching, and from controlling for a reverse causality between institutional ownership and innovation variables by two-stage regressions using an instrumental variable. These findings indicate that institutional investors encourage managers in Korean listed firms to participate in firm innovation with long-term nature and high probability of failure through their monitoring and information acquisition activities.

Keywords:

Institutional investor, Institutional Ownership, Firm Innovation, Patent Applications

Acknowledgments

We appreciate anonymous reviewers for providing valuable comments.

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• The author Jeongdae Yim is currently a research professor at College of Business Administration in Chonman National University. Jeongdae Yim earned a bachelors’ degree, a master’s degree, and Ph. D. in business administration from Kyungpook National University. He is interested in the areas of innovation and innovation policy.

• The author Taeho Yang is currently working at Daegu Regional Council for Human Resources Development in Daegu Chamber of Commerce & Industry.