Heterogeneous Shareholders’ Participation, COVID-19 Impact, and Innovation Decisions of State-Owned Firms: Evidence from China

Rui Wang,Xinxin Xu,Sheng Ma,Pan Song

doi:10.3390/su13084406

Abstract

Innovation ability has become an important factor affecting the global competitiveness and sustainable development of state-owned enterprises (SOEs) in China, particularly during the COVID-19 period. This study examined the association between heterogeneous shareholders and SOE innovation, in addition to the moderating impact of corporate governance characteristics and the COVID-19 pandemic on this association. Using data from Chinese A-share listed mixed ownership enterprises (MOEs), we found that the mixed ownership reform of SOEs positively affected firm innovation compared to other MOEs by reducing agency costs, indicating that the manager view channel was proven. We also found that heterogeneous shareholders resulted in more innovation output in state-owned holding mixed ownership enterprises (SHMOEs) with affiliated managers, in those audited by lower reputation accounting firms or that had a lower external marketization, or during the COVID-19 period. The implications of this study are of importance for improving heterogeneous shareholders’ active participation in the mixed ownership reform of SOEs.

Highlights

The ability to innovate is the decisive factor for sustainable competitive advantage in a firm, but is the driving force of sustainable economic growth for a country [1,2]
When the dependent variable is Ln_IA, the coefficients of state-owned holding mixed ownership enterprises (SHMOEs) are significantly positive in columns (1) and (2), which indicates that SHMOEs have higher innovation output than other type of mixed ownership enterprises (MOEs)
When the dependent variable is Ratio_IA, the coefficients of SHMOE are significantly positive in columns (5) and (6), which indicates that innovation output accounts for a greater proportion of total assets in SHMOEs than other types of MOEs

Summary

Introduction

The ability to innovate is the decisive factor for sustainable competitive advantage in a firm, but is the driving force of sustainable economic growth for a country [1,2]. The existing research has mainly studied the factors from the perspectives of innovation ability and innovation willingness. From the aspect of innovation ability, most studies focus on the channels, such as obtaining government R&D funding [3] and using the smoothing function of a working capital [4], to improve the ability of a firm’s resource obtainment, so as to promote firm innovation. From the aspect of innovation willingness, the existing literature mainly analyzes the influence of internal and external corporate governance mechanisms on a firm’s innovation, from the perspective of an agency problem, such as ownership concentration [5], board of directors [6], management compensation incentives [7], institutional investors [8], security analysts [9], legal environment [10], and product market competition [11]. The relevant literature does not pay enough attention to the influence of heterogeneous major shareholders on a firm’s innovation activities

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Results

Conclusion