The effects of owner identity and external governance systems on R&D investments: A study of Western European firms

This paper builds on agency and institutional theory to extend the analysis of the effects of ownership and control on R&D investments by considering the influence of different types of ownership and of institutional corporate governance systems. Our empirical analysis is based on a unique dataset of 1000 firms publicly-traded in six European countries (France, Germany, Italy, Norway, Sweden and the UK). Controlling for industry- and firm-level effects, our findings show that higher shareholding by families is negatively associated with R&D investment. Moreover, widely-held firms invest less in R&D in the United Kingdom than in Continental European countries, thus suggesting the existence of a greater pressure towards the reduction of R&D in market-based governance systems. The results are robust against possible sample selection biases due to firms’ discretional R&D disclosure.