The governance role of corporate party organization on innovation

Abstract

In this paper, we provide evidence supporting the positive effect of corporate party organizations on Chinese state-owned enterprises’ innovation outputs. To illustrate the underlying mechanisms, we verify the impact of corporate party organizations in reducing management myopia and over-invest in R&D activities, supporting the governance role of the corporate party committee. Further, the effect of corporate party organization is weakened when alternative governance mechanisms work. We adopt several methods to address endogeneity concerns and find our results robust. Overall, this paper contributes to the mixed evidence on governance and innovation from the perspective of a unique arrangement, corporate party organizations.