Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Evidence on the role of Ownership Structure
on Firm’s Innovative Performance.
Raquel Ortega-Argilés
European Commission, JRC-IPTS
Rosina Moreno
University of Barcelona, AQR-IREA
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Companies have become aware
of their need to encourage their
capacity for innovation
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• The specialization of tasks has
lead the firm into the introduction
of
EXTERNAL MANAGERS
A company’s ability to innovate depends
on a series of factors:
in the decision-making process
– The environment in which the firm is
operating: determinants of the market
and location where the firm operates.
– The resources that the company
allocates to engineering, design,
research and marketing.
– The company’s management and
internal organisation.
– The desire to differentiate its products or
processes from those of its competitors.
• The dispersion of the ownership
structure has leaded the firm a
DIFUSED CONTROL and
ATOMISTIC OWNERSHIP
These are the most suitable
situations for encountering
information asymmetries in the
management decisions
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Motivation
Firm-specific characteristics play a role in explaining
corporate innovation behaviour
• Aspects related to firm ownership and capital structure have been
avoided in the innovative literature so far.
• There exist a number of papers that analyse the influence of
some corporate governance variables on the R&D investments,
there are only few attempts in the literature of innovative
performance measured by innovative results (counts).
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Short review of the literature:
Large shareholders have strong incentives in profit maximization and
enough control over the assets of the firm to put pressure on managers to
have their interest respected and risky projects maintained
(Shleifer and Vishny, 1997).
In the same line, some studies explain that the concentration of capital
in a small number of owners helps to align the management team with the
shareholders’ interests, leading to reducing high risk investment policies
such as the ones of innovation, and to a loss of some of the benefits of
specialisation
(Hill and Snell, 1988; Burkart et al., 1997).
Has the concentration of the ownership in a few hands
a direct impact in innovative performance?
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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The entrepreneurship literature put emphasis in the role played by the
entrepreneur, which most people recognize as meaning someone who
organizes and assumes the risk of a business in return of the
profits. In many cases, owners delegate decisions to salaried managers,
and the question is:
are independent directors better suited as decision-makers for innovative
strategies than insiders?.
The owners have appropriate information about firm’s activities and
this is fruitful to enhance innovation, but in most cases, the innovative
activities carry out “new combinations” by such things as introducing new
products or processes, identifying new exports markets or sources of
supply, or creating new types of organization and the owner needs
judgment to deal with the novel situations connected with innovation
(Casson, 1991; Crespi, 2004).
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Traditional literature (other aspects to control for):
“…There is no more pleasant fiction than that technological change
is the product of the matchless ingenuity of the small man forced
by competition to employ his wits to better his neighbor. Unhappily,
it is a fiction.” (Schumpeter, 1942; Galbraith, 1956; Acs and
Audretsch, 2005)
The technological opportunities have a firm-specific nature, the
different sectoral innovative behaviors cannot be simply treated as
a random phenomenon. (Dosi, 1988; Cohen and Klepper, 1992;
Malerba and Orsenigo, 1994)
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Traditional literature (the role of space):
Firm innovative attitude is influenced by the environment where
the firm is operating.
High competitive markets push firms to secure innovation from
the competitors to maintain their market shares.
The accessibility to labour force or the industrial dynamicity
generate agglomeration economies that influence positively the
innovative behaviour of the located firms (Autant-Bernard, 2003).
Being located in highly innovative regions generates knowledge
spillovers creating a favourable environment for innovation
(Audretsch and Feldman, 1999 and 2005).
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Methodology
“Knowledge Production Function”
Griliches (1979, 1986)
[Pakes and Griliches, 84; Hausman et al, 84; Acs and Audretsch, 88; among others]
Y= F (X, K, R, )
Y= output variable
X= standard input variables (human capital, physical capital, materials)
K= R&D input variable o technological knowledge (R&D investment)
R= Environmental characteristics (market and region)
PATi= F(internal structure –size,ownership and control
Structure-, environmental vars -market and region-,
innovation inputs)
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Data:
Databases:
Survey of Entrepreneurial Strategies (ESEE)
Industrial Business Survey (regional data)
Spanish Patents and Trademarks Office (regional panel data)
Sample:
Unbalanced panel that contains data of 2643 Spanish
manufacturing firms for the 1994-2001 period.
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Dependent variable: Innovative output or Innovative Performance
PATit= number of patents and/or utility models
Excess of zeros
Discrete non-negative nature of the variable
Small values
Count Data Models: POISSON & NEGATIVE BINOMIAL
I. POISSON
•Most common CDM
•Num. of events, given a set of regressors x, has a Poisson distribution with
parameters
•The application of the Poisson requires equality of means and variance
•Excess of zeros: the st.error will be biased giving spurious high values to the t
statistics (Cameron and Trivedi, 1990)
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Dependent variable: Innovative output or Innovative Performance
PATit= number of patents and/or utility models
Excess of zeros
Discrete non-negative nature of the variable
Small values
Count Data Models: POISSON & NEGATIVE BINOMIAL
II. NEGATIVE BINOMIAL
•Does not impose equidispersion in the dependent variable.
•Assume that the variance is a quadratic function of the mean.
•We can control for the overdispersion in the variables, and we can reduce the
unobserved heterogeneity by means of time-series application.
NOTE: We have estimated two more count data models (pooled sample): ZIP and
ZINB, the results are practically the same.
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Variables:
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Descriptive Statistics:
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Results:
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
Results:
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Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
VARIABLES
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Poisson
I
II
III
V
PATREG
----
----
2.167**
(1.052)
----
SECTOR
YES
YES
YES
NO
-0.967*
(0.570)
YES
-3.078***
(0.554)
NO
-2.230*
(0.732)
NO
NO
YES
NO
-3.078*** -3.155*** -3.296*** -3.543***
(0.554)
(0.467)
(0.487)
(0.594)
SIZE
AGE
SHARE
SHARE*FOR
SHARE*PUB
MARKET
EMPLREG
INNOVREG
RDREG
YEAR
Intercept
Wald test:
Chi2(K-1)
N. Obs
N. Indivs
Log Likel:
LR test
0.066***
(0.023)
0.995***
(0.081)
-0.841***
(0.135)
-0.002*
(0.000)
-0.012***
(0.001)
0.004
(0.012)
0.564***
(0.111)
----
IV
0.258*** 0.128*** 0.304*** 0.140***
(0.031)
(0.033)
(0.045)
(0.043)
0.287*** 0.171***
-0.054
0.168**
(0.053)
(0.056)
(0.063)
(0.078)
-0.611***
-0.086
-0.061
0.062
(0.074)
(0.062)
(0.066)
(0.101)
0.002*
-0.001
-0.001
-0.001
(0.001)
(0.002)
(0.002)
(0.003)
-0.007*** -0.007*** -0.007*** -0.006***
(0.001)
(0.002)
(0.002)
(0.002)
0.0078*
-0.005
-0.007
-0.009
(0.004)
(0.004)
(0.004)
(0.006)
0.937***
0.058
-0.030
-0.185
(0.082)
(0.147)
(0.149)
(0.227)
---0.022***
------(0.007)
------0.353***
---(0.133)
----------0.058
(0.717)
0.005***
---------(0.002)
YES
YES
YES
YES
RD
0.115***
0.443***
(0.018)
(0.027)
0.509***
0.117**
(0.049)
(0.050)
-0.937*** -0.388***
(0.069)
(0.074)
-0.006
-0.002***
(0.001)
(0.001)
-0.008*** -0.007***
(0.001)
(0.001)
0.009**
0.006
(0.004)
(0.004)
0.432***
0.473***
(0.067)
(0.072)
0.060***
---(0.012)
---0.613***
(0.207)
-------
Negative Binomial
VI
VII
----
483.68*** 891.52*** 322.25*** 384.92*** 118.08*** 179.88***
2949
1441
-4780.76
12000***
2952
1798
2330
1443
1029
1349
-4517.91
-2246.51
-3611.13
11000*** 6484.95*** 11000***
2949
2952
1441
1443
-2825.95 -2794.41
190.45*** 196.28***
VIII
0.246***
(0.047)
0.041
(0.068)
-0.018***
(0.067)
-0.001
(0.002)
-0.008***
(0.002)
-0.007
(0.005)
0.316**
(0.166)
----
NO
-2.956***
(0.520)
------0.005**
(0.002)
YES
79.95***
122.64***
1798
1029
-1618.95
47.83***
2330
1349
-2414.28
150.51***
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Empirical results
•The control of the decision of the management team by means of
concentration of the ownership and introduction of owners in
management positions tasks reduced the amount of innovation
pursued by the firm due to the reduction of the specialization of the
decision tasks and the adverse-risky innovative strategy.
•Foreign ownership seems to increase the negative effect of the
concentration of the ownership and the presence of insiders in
decision tasks in firm patenting activities (liability of foreignness
effects).
•The scales economies in R&D, firm size, learning by doing effect,
high technological sectoral opportunities and the internalization
of the market increase the chances of patenting.
Huelva 17th and 18th November 2008 – II Workshop on Entrepreneurship Statistics
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Empirical results
•The results show that firm’s location is important for explaining the
patent activity of Spanish manufacturing firms. There is a positive
effect of being located in an environment with a high innovative
activity.
•Regional high innovative activity implies the existence of knowledge
spillovers across individuals of different firms which would result in a
higher patenting activity.
•The presence of agglomeration economies coming from a dense
labour market with a subsequent higher endowment of human capital
would also imply higher levels of innovation output.