U. of Groningen, Faculty of Economics and Business, Netherlands
Extant research has demonstrated that common ownership affects firms’ competitive behavior and corporate innovation. Building on this foundation, we delve deeper into the complex relationship between common institutional ownership and innovation and examine the relation with firms’ technological diversification. We theorize and provide empirical evidence for a positive relationship between common ownership and firms’ technological diversification. Our findings remain robust across various alternative estimations, including an instrumental variable approach levering mergers and acquisitions as an exogenous shock and propensity score matching methods. Our findings contribute to the literature on common ownership by offering a more refined understanding of common ownership effects on corporate innovation. Additionally, we contribute to the literature on technological diversification by uncovering a heretofore hidden determinant of diversification.
