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Do long‐term institutional investors foster corporate innovation?
Author(s) -
Kim HyunDong,
Park Kwangwoo,
Roy Song Kyojik
Publication year - 2019
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12284
Subject(s) - institutional investor , business , term (time) , investment (military) , accounting , monetary economics , finance , corporate governance , economics , physics , quantum mechanics , politics , political science , law
Abstract This article examines the effect of institutional investors’ investment horizons on firms’ innovation activities. We conjecture that the presence of long‐term institutional investors mitigates managerial myopia, prompting firms to generate greater corporate innovation outputs. Using data on patents and patent citations for US firms, we find that institutions’ investment horizons are positively related to the number of patents and patent citations. We also document that long‐term (short‐term) institutional ownership is positively (negatively) related to the innovation outputs. This article makes an additional contribution to the corporate innovation literature by addressing the positive role of long‐term institutional investors.