Chinese Ownership Structures and Innovation Performances

This paper explores whether ownership structures are associated with the innovation performances of publicly listed firms in China within the framework of corporate governance. A typical listed firm in China has a mixed ownership structure with three predominant groups of shareholders—the state, legal entities, and individuals. Innovation performances are measured by the number of patents granted in China and the U.S., respectively. We find that innovation performances are negatively and significantly associated with the fraction of the state shares, while innovation performances are positively and significantly related to the proportion of the legal-entity shares. Second, we also find that the innovation performances are significant and positively related to the proportion of foreign stocks. The results indicate that, in the context of China listed firms, the state ownership have adverse effect on firm’ innovative performance, and the large legal entities and foreign shareholders enhance firm’ innovative activities. Our findings are robust for alternative model specifications and proxies for ownership structures.