Ownership structure and R&D investment: the role of identity and contestability in Spanish listed firms

Purpose - The purpose of this paper is to analyze the relationship between the ownership structure and the investment in research and development (R&D) for a sample of listed Spanish companies. Design/methodology/approach - Following the agency theory and the socioemotional wealth (SEW) perspective, the authors propose that R&D investment is affected by ownership structure, specifically by the identity of the controlling owner (family firms and firms with an institutional investor) and the level of contestability by other shareholders. In order to test these hypotheses, the authors build an original database identifying, at a 10% threshold, the ultimate shareholders of a sample of 96 Spanish firms listed during 2008-2018 (1,002 obs). Findings - The results show that there is no significant relationship between the ownership concentration and the R&D investment. Only when the authors consider the nature of the main shareholder, the authors find that in family firms there is an inverted U relationship between ownership and R&D, so that at low levels of ownership, the R&D increases, while at high levels of ownership (that we compute around 54%) the R&D decreases. Also, when the main shareholder is an institutional investor, the greater its ownership, the higher the R&D investment. Finally, the authors test that, contrary to what mainstream suggests, contestability in family firms is higher when ownership in the hands of other family shareholders increases. Originality/value - The work uses an original database to test a nonlinear relationship between ownership and R&D investment in family firms. Also, the study addresses a topic hardly ever discussed in the literature about R&D as it is the role of the contestability by other controlling shareholders.