Working Paper: NBER ID: w15304
Authors: Sharon Belenzon; Tomer Berkovitz; Patrick Bolton
Abstract: This paper examines the relation between ownership, corporate form, and innovation for a cross-section of private and publicly traded innovating firms in the US and 15 European countries. A striking novel observation emerges from our analysis: while most innovating firms in the US are publicly traded conglomerates, a substantial fraction of innovation is concentrated in private firms and in business groups in continental European countries. We find virtually no variation across US industries in the corporate form of innovating firms, but a substantial variation across industries in continental European countries, where business groups tend to be concentrated in industries with a slower and more fundamental innovation cycle and where intellectual protection of innovators seems to be of paramount importance. Our findings suggest that innovative companies choose the corporate form most conducive to R&D, as predicted by the Coasian view of how firms form. This is especially true in Europe, where there are fewer regulatory hurdles to the formation of business groups and hybrid corporate forms. It is less the case in the US, where conglomerates are generally favored.
Keywords: No keywords provided
JEL Codes: O16; O31; O32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| corporate form (G30) | level of innovation (O35) |
| conglomerates (L22) | funding R&D projects (O32) |
| business groups (L20) | intellectual property protection (O34) |
| regulatory environment (G38) | corporate form (G30) |
| nature of innovation cycle (O36) | corporate form (G30) |
| minority shareholders (G34) | innovation (O35) |
| decentralized structure (L22) | innovation (O35) |
| intellectual property rights (O34) | effectiveness of corporate forms (G38) |
| stigma of failure (D29) | effectiveness of corporate forms (G38) |