On “innovation and institutional ownership”
Keywords: 
Corporate governance
Innovation
Institutional ownership
Managerial short-termism
Patents
Issue Date: 
Jun-2024
Publisher: 
Elsevier
ISSN: 
0929-1199
Editorial note: 
This article is available under the Creative Commons CC-BY-NC-ND license and permits non-commercial use of the work as published, without adaptation or alteration provided the work is fully attributed.
Citation: 
Simeth, M. (Markus); Wehrheim, D. (David). "On “innovation and institutional ownership”". Journal of corporate finance. 86, 2024-06, 102569
Abstract
In their article “Innovation and Institutional Ownership”, Aghion, Van Reenen and Zingales (2013) find that the rise in institutional stock ownership in the U.S. during the 1990s led to an increase in corporate innovation, as measured by patent and patent citation counts. Their article concludes that “contrary to the view that institutional ownership induces a short-term focus in managers, we find that their presence boosts innovation” (p. 302). Subsequent research has generally accepted this finding at face value. However, we uncover several critical issues with their data. Addressing these issues renders the results economically and statistically insignificant and, in some instances, even suggests a negative relationship between institutional ownership and U.S. innovation.
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