Common institutional ownership and green innovation in family businesses: Evidence from China

Given the ubiquity of family businesses and the growing importance of ecological sustainability, it is crucial to promote family businesses to carry out green innovation activities and enhance their green innovation capability. In recent years, the prevalence of common institutional ownership in capital markets has attracted the attention of the academic community. Drawing on socioemotional wealth theory and strategic reference point theory, this paper tries to explore the impact of common institutional ownership on green innovation in family businesses. Using data from Chinese-listed family businesses from 2009 to 2021, this paper finds that common institutional ownership can facilitate green innovation in family businesses. The higher the degree of their linkage and the greater the shareholding, the more pronounced the synergistic effect. The findings remained valid after considering the endogeneity issue and conducting robustness tests. The mechanism test suggests that common institutional ownership enhances green innovation in family businesses by improving the internal control quality and reducing financing constraints. This paper contributes to the study of how to effectively facilitate green innovation in family businesses by identifying the common institutional ownership from the perspective of external governance mechanisms. In addition, this paper enriches the research on the economic consequences of common institutional ownership. Finally, various practical implications for family businesses and policymakers may be realized, which may help family businesses to enhance their green innovation capabilities and contribute to the green transformation of society.