Ownership, Innovation and Variable Institutional Quality

Tran, Hien and Freel, Mark (2022) Ownership, Innovation and Variable Institutional Quality. Corporate Governance: An International Review. ISSN 0964-8410

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Research Question/Issue: Innovation is a consistent feature of studies of transition and transformation. State ownership as the engine of innovation and technological change may be juxtaposed with the “liability of stateness” and the notion that “privatization works”. This study seeks to investigate the relationship between legal ownership and innovation inputs and outputs, while accounting for the moderating effect of institutional quality on this relationship. Research Findings/Insights: We exploit unique data from a very large-scale panel survey of enterprises (65,750 firms between 2007 to 2014) in Vietnam, a fast-growing but understudied transition country, and apply advanced methodologies that control for the selection bias and endogeneity of legal ownership. Our findings point to the continued dominance of State-Owned Enterprises (SOEs) in innovation activities in Vietnam. However, the returns to innovation in SOEs accrue only up to a point and improving institutional quality serves to diminish their advantage over Privately-Owned Enterprises (POEs) and to level the playing field. Theoretical/Academic Implications: We employ an integrated framework that develops predictions from resource dependence, agency, and institutional theories to explore the direct and contingent influences of ownership and institutional quality on the firm-level innovation production process. Our study contributes to the growing literature on state ownership and innovation in transition and emerging economies and the recent calls for greater attention to local institutional context and revising the existing theories on “state underperformance”. Practitioner/Policy Implications: This study offers insights to policy makers in enhancing the quality of local institutions. Higher quality institutions moderate the advantages that state ownership confers and ameliorate the disadvantages associated with private ownership.

Item Type:
Journal Article
Journal or Publication Title:
Corporate Governance: An International Review
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Deposited On:
25 Aug 2022 14:25
Last Modified:
25 Aug 2022 14:25