Innovation and family ownership: empirical evidence from India

Article


Lodh, S., Nandy, M. and Chen, J. 2014. Innovation and family ownership: empirical evidence from India. Corporate Governance: an International Review. 22 (1), pp. 4-23. https://doi.org/10.1111/corg.12034
TypeArticle
TitleInnovation and family ownership: empirical evidence from India
AuthorsLodh, S., Nandy, M. and Chen, J.
Abstract

Manuscript Type
Empirical
Research Question/Issue
This study examines the direct effect of family ownership on innovation in emerging markets by using data from Indian family-controlled publicly listed firms as its sample. In particular, we study (1) the direct effects of family ownership on innovation and (2) the influences of business group affiliation on these family firms.
Research Findings/Insights
Using an unbalanced panel of 395 Bombay Stock Exchange (BSE) listed Indian firms during the years 2001 and 2008, we found that the impact of family ownership on innovation productivity is positive (after controlling for possible endogeneity). We further emphasized the business group affiliation of family firms and distinguished between the innovation activities of group-affiliated and stand-alone family firms. We found that affiliating with top 50 business groups increases the innovation activities of these family firms.
Theoretical/Academic Implications
Theoretically, we complement agency theory by incorporating both the institutional perspective and the external resourcing perspective to provide a more robust framework for examining the impact of family ownership on innovation in emerging markets. Methodologically, we adopted a more rigorous econometrics method by providing a panel analysis that used a system GMM estimator and addressed the endogeneity issue thoroughly, which represented a significant improvement over the shortcomings of the methodologies found in the existing literature.
Practitioner/Policy Implications
Our findings suggest that the Indian government should provide support for affiliating family firms with business groups while improving policies on information disclosures; it should also establish a proper corporate governance mechanism for private and public family business. The findings further suggest that a corporate governance code should encourage family firms to have an independent professional CEO.

KeywordsCorporate Governance, Patent, Innovation Productivity, Family Firms, Indian Business Group
PublisherWileyBlackwell
JournalCorporate Governance: an International Review
ISSN0964-8410
Publication dates
Online23 Jun 2013
Print08 Jan 2014
Publication process dates
Deposited06 May 2015
Output statusPublished
Accepted author manuscript
Copyright Statement

This is the peer reviewed version of the following article: Lodh, S., Nandy, M. and Chen, J. (2014), Innovation and Family Ownership: Empirical Evidence from India. Corporate Governance: An International Review, 22: 4–23. doi:10.1111/corg.12034, which has been published in final form at http://dx.doi.org/10.1111/corg.12034. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving

Digital Object Identifier (DOI)https://doi.org/10.1111/corg.12034
LanguageEnglish
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