Promote or inhibit: State-owned equity participation and family firms' innovation investment

Targeting A-share listed family firms on the Shanghai and Shenzhen Stock Exchange, this study focuses on the special situation of state-owned equity participation in non-state-owned enterprises. Specifically, we explore the relationship between state-owned equity participation, intergenerational succession in family firms, and innovation investments. The results reveal a prominent "double-edged sword" effect of state-owned equity participation on family firms; that is, there is a reversed U-shaped relationship between share-holding proportion and innovation investment. To some extent, the intergenerational succession of family firms moderates the reversed U-shaped relationship. Moreover, the double-edged sword effect of state-owned equity is more prominent in family businesses that are created by the entrepreneur from scratch. Compared to existing research arguing for the linear relationship between state-owned equity participation and innovation investment by enterprises, we reveal the impact of the excessive supervision effect arising from the increase in state-owned equity holdings on family firms' innovation. This study confirms the dou-ble-edged sword effect of state-owned equity participation in family firms and further explores the influence of intergenerational succession and the heterogeneity of family firms on such an effect. By revealing the dou-ble-edged sword effect of state-owned equity holdings, this study enriches the research on the participation of private enterprises in mixed-ownership reform.(c) 2023 The Author(s). Published by Elsevier Espana, S.L.U. on behalf of Journal of Innovation & Knowledge. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)