Managing R&D in Chinese listed firms: The interactive effects of ownership concentration and corporate governance

Ownership concentration remains a salient institutional feature among public listed firms in emerging and transitional economies. This study examines how a listed firm's ownership concentration interacts with its governance mechanisms in shaping corporate R&D investments. By analyzing panel data of Chinese listed firms between 2010 and 2012, I have three core findings. First, ownership concentration by the largest controlling shareholder negatively affects a firm's R&D intensity, but a small team of shareholders' ownership concentration plays a positive role. Second, a firm's monitoring mechanisms (measured by its sizes of the board and independent directors) and CEO stockholding positively affect the firm's R&D input. Third, CEO stockholding's positive role in promoting firm R&D is stronger in the firms with a more dispersed ownership structure. This study discloses the ways ownership concentration influences corporate governance and, in turn, affects corporate innovation.