[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/11472.html
   My bibliography  Save this paper

When is Good News Not Good News? Opening Up the Black Box of Innovation for Family Firms

Author

Listed:
  • Massa, Massimo
  • Hsu, Po-Hsuan
  • Huang, Sterling
  • Zhang, Hong
Abstract
This paper examines the incentives for family firms to innovate. We argue that, due to the wealth concentration of major shareholders, family firms are incentivized to diversify their risk through innovation. In particular, family firms use innovation to explore new (as opposed to existing) fields of business. Using a comprehensive sample of U.S. family-owned public firms and patents for the period from 1998 to 2010, we confirm that family ownership is positively (negatively) related to exploratory (exploitative) innovation. Tests based on instrumental variables regression (divorce laws of family firms’ headquarter states or neighboring states) and regulatory shocks in inheritance taxes further offer a causal interpretation. Market prices, however, respond negatively to family firms’ exploratory innovation, suggesting that such innovation may benefit major shareholders of family firms at the cost of minority shareholders. Our results suggest that risk-mitigation incentives play an important role in affecting innovation strategies, which may have subtle implications for investors in financial markets.

Suggested Citation

  • Massa, Massimo & Hsu, Po-Hsuan & Huang, Sterling & Zhang, Hong, 2016. "When is Good News Not Good News? Opening Up the Black Box of Innovation for Family Firms," CEPR Discussion Papers 11472, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11472
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP11472
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Family firms; Innovation; Under-diversification; Innovation strategies;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:11472. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.