Original Research

Heterogenic institutional investors and their influence on corporate innovation: Evidence from a transition economy

Syed Tauseef Ali, Farman Ali, Adnan Khan, Zhen Yang, Muhammad Ullah, Misraku M. Ayalew
South African Journal of Business Management | Vol 52, No 1 | a2171 | DOI: https://doi.org/10.4102/sajbm.v52i1.2171 | © 2021 Syed T. Ali, Farman Ali, Adnan Khan, Zhen Yang, Muhammad Ullah, Misraku M. Ayalew | This work is licensed under CC Attribution 4.0
Submitted: 05 June 2020 | Published: 30 August 2021

About the author(s)

Syed Tauseef Ali, School of Accounting, Dongbei University of Finance and Economics, Dalian, China
Farman Ali, School of Accounting, Dongbei University of Finance and Economics, Dalian, China
Adnan Khan, School of Management, Jiangsu University, Zhenjiang, China
Zhen Yang, School of Business Administration, Dongbei University of Finance and Economics, Dalian, China
Muhammad Ullah, School of Management, University of Clermont Auvergne, Clermont-Ferrand, France
Misraku M. Ayalew, College of Business and Economics, Department of Accounting and Finance, Dilla University, Dilla, Ethiopia


Share this article

Bookmark and Share

Abstract

Purpose: The literature lacks a specific mechanism that may help to explain the variation in corporate innovation. This research helps to explain a specific mechanism that affects corporate innovation.

Design/methodology/approach: Ordinary Least Square (OLS) regression has been used to analyse the data collected from Chinese manufacturing firms listed on Shenzhen and Shanghai Stock Exchanges from 2007 to 2015. Innovation input has been measured through research and development (R&D) expense scaled by total assets, while the number of forward invention patent citations has been used to measure the quality of innovation performance.

Findings/results: The results show that pressure-resistance institutional investors (PR institutions) encourage, while pressure-sensitive institutional investors (PS institutions) discourage R&D intensity. Additionally, exploring the efficiency logic, results show that PR institutions positively moderate both in SOEs (state-owned enterprises) and non-SOEs, while in contrast, PS institutions negatively moderate only in non-SOEs. Overall, the results support our argument that institutional investors’ business relations act as a mechanism that affects not only their fiduciary responsibilities, but also their proneness to pressure which in turn affects corporate innovation.

Practical implications: There is a great need to protect institutional investors from forming business relations with firms in which they invest. This strategy will help institutional investors to perform their valuable role in enhancing corporate innovation.

Originality/value: The article contributes to the existing literature by highlighting institutional investors’ heterogenic behaviour. Second, this research highlights institutional investors’ business relations, which affect R&D intensity and innovation performance.


Keywords

corporate innovation; pressure-sensitive institutional investors; pressure-resistance institutional investors; R&D intensity; institutional investors; China.

Metrics

Total abstract views: 465
Total article views: 150


Crossref Citations

No related citations found.