I examine the relation between the presence of governance provisions and corporate innovation for a sample of firms between 1984 and 1997. I find a positive relation between four proxies for innovation and the broad Gompers, Ishii, and Metrick (2003) Index. However, in subsample analyses, I find that only those provisions that officers and directors actively adopt are positively related to innovation; coverage by state-level antitakeover legislation is typically unassociated or negatively associated with innovation. The evidence suggests that it is the visibility of officers and directors' actions rather than the potency of the takeover protection that best explains the observed pattern

In this study, we examine the impact of class action litigation shocks on corporate innovation. Our experimental design is based on an unanticipated court ruling that reduces the risk of shareholder class action lawsuits for firms located within the jurisdiction of the US Ninth Circuit. Innovation output by firms headquartered in this area increased significantly after this decision compared with that of firms elsewhere. This result is consistent with our trading hypothesis, which states that the threat of litigation leads to managerial myopia. The increase in innovation is more pronounced at high-tech firms and firms operating in a competitive environment. Other measures of ex ante litigation risk indicate that firms with the greatest litigation risk experience the greatest increase in innovation after this decision. We conclude that a reduction in the threat of class action litigation leads firms to increase innovation

This study examines the impact of managerial foreign experience on corporate innovation using manually collected data of Chinese listed companies. We find that managerial foreign experience is positively associated with corporate innovation. This association is robust to a series of robustness checks, including the use of Heckman two-step sample selection model, propensity score matching procedure, and the market reaction to the appointing announcements of managers with foreign experience. Further analyses indicate that senior managers with foreign experience have a more significant impact on corporate innovation than junior managers with foreign experience; both foreign study experience and foreign work experience have important impacts on corporate innovation; managers with foreign experience in private enterprises have more initiatives to innovate than in state-owned enterprises; and managers who gain foreign experience in the United States tend to be more influential and innovative than those who have foreign experience from other countries or regions. Overall, our results suggest that managerial foreign experience matters for corporate innovation in emerging markets

This paper examines the ability of latent firm and manager characteristics to explain variation in innovation productivity. Evidence suggests that latent, but not observable, firm and manager characteristics explain a large portion of the variation in a firm's innovation productivity. Our tests mostly show that latent firm characteristics explain slightly more of the variation relative to latent manager characteristics. For robustness, our analysis shows no significant difference in the average change in innovation productivity and in abnormal returns following two different samples of manager-firm separations: one where managers' expected innovation abilities are high and the other a random sample. Overall, the results suggest that compared to firm characteristics, managers matter moderately less for corporate innovation

We examine whether and how national culture influences corporate innovation using a newly available comprehensive database on innovation around the world. After controlling for the impacts of formal institutions, and firm-level and country-level variables, we find that culture has relevance for innovation: The probability of a firm innovating is higher in individualistic, indulgent, and long-term oriented societies, as well as in cultures with less power distance, less uncertainty avoidance, and less masculine cultures. In the innovative firms subsample, we continue to find the same significant impact of culture on firms' innovation performance/quality. Our results are robust to endogeneity concerns, different model specifications, alternative measures of innovation and culture, and different subsample analyses

This paper presents evidence that labor-saving technologies positively impact a firm's financial leverage. The results are robust with two different measures of labor-saving innovations: automation and process innovations. The effects are more pronounced in firms facing greater labor input rigidity, such as firms with higher labor intensity, share of minimum wage workers, and union coverage. Our analysis suggests that labor-saving innovations reduce wage rigidity, allowing firms to increase financial leverage

We find strong evidence that firms with employee-friendly workplaces achieve greater innovative success, particularly in industries where innovation is more difficult to achieve. Furthermore, employee-friendly firms were also more inclined to sustain R&D investment during the recent crisis. These findings are consistent with the view that an employee-friendly workplace helps to develop tolerance for failure, which encourages engagement in innovation. We find no support for alternative explanations, such as employee-friendly workplaces helping to attract and retain talented employees and reducing career concerns of executives, which could nurture innovation

We use a unique dataset on domestic pension fund investments to estimate the relationship between pension fund investment and innovation within Danish unlisted firms. We find a significant positive association between pension fund investment and various measures of innovation, including those targeting green technologies. However, this association is attenuated in highly competitive industries, consistent with a governance channel through which pension funds exert discipline on managers. Overall, our study underscores the important role of pension funds in supporting firm innovation, particularly by reducing managerial slack and by supplying stable, long-term capital to unlisted firms

This paper investigates the effects of stock pledge by controlling shareholder on corporate's future innovation productivity and the mechanism through which stock pledge affects innovation. We find that both the existence of stock pledge by controlling shareholder and the percentage of shares pledged by controlling shareholder are significantly negatively related to firms' future innovation outputs and quality, and these baseline results are robust to a variety of tests on sample selections, model specifications, and variable definitions. We further adopt several methodologies to address endogeneity concerns and establish a causal relationship between stock pledge by controlling shareholder and innovation. We then provide evidence to show that the impediment effect of stock pledge by controlling shareholder on innovation is possibly due to controlling shareholder's fear of losing corporate control in case of innovation failure. Finally, we find that although stock pledge is a possible channel to relieve a firm's financial constraint, it does not encourage the firm to invest more in innovation

Many emerging markets allow foreign investment as a way to reform domestic markets. Extant studies have found a positive externality on innovation brought forth by foreign direct investment (FDI); however, we know very little about the externality of another form of foreign investment, ownership by foreign institutional investors (FII), on innovation. In this paper, we document one form of FII externality by showing that foreign institutional ownership of the customer firm results in higher supplier innovation. We also show that the FII externality on supplier innovation is stronger when customers have more influence on the suppliers and when the FIIs can facilitate information flow better. Our findings suggest that the real impact of FII can go beyond the underlying firms, and promoting FII may benefit firms, especially smaller firms in emerging countries that do not directly have foreign ownership