Does institutional short-termism matter with managerial myopia?

Literature regarding the impact of institutional investors on firm's research and development (R&D) expenses supports that institutional ownership facilitates managerial discretion on R&D expenses in the US. However, the scenario may change when considering institutional investment horizon. This study investigates whether managerial myopic investments on R&D exist in an emerging market, Taiwan, and whether institutional investing exacerbates managerial myopic behavior. Results indicate that corporate managers cut R&D spending to meet short-term earnings goals in Taiwan. Domestic institutional short-termism will intensify managerial myopia. Conversely, foreign institutional ownership acts as a buffer to facilitate R&D.