Cross-ownership And Corporate Innovation

Innovation is a source of sustainable development for the country and it is the key for companies to remain competitive in the market.As corporate innovation is a high-risk activity with a long R&D process,requiring long-term investment and uncertain outcomes,corporate innovation activities are to some extent hindered by these factors,so how to promote corporate innovation through rational arrangements has become an important topic.What the drivers of corporate innovation include and what their transmission mechanisms are has always been a matter of academic interest and this is the subject of this paper.The innovation activities of enterprises are usually based on the resources they possess,however,if enterprises are limited to the internal information and resources,they are prone to stereotypes,because the situation of the industry and the market is constantly changing,and the decisions of enterprises’ innovative R&D activities need to be adjusted and changed according to the situation of the industry and the market,so access to external heterogeneous information and resources has an extremely important impact on enterprises’ innovation.This is why access to external heterogeneous information and resources is so important for innovation.Currently,corporate boundaries are increasingly blurred and firms are linked to each other through a variety of informal systems.In the capital market,shareholders may become shareholders of several companies at the same time through the purchase and sale of equity shares.Therefore,cross-ownership,with their role in monitoring governance and connecting external resources,are an important form of linkage between companies.This paper uses a combination of theoretical analysis and empirical research to investigate the relationship between cross-ownership and corporate innovation.The theoretical analysis combines agency theory,resource dependence theory and utility theory to explore the relationship between cross-ownership and corporate innovation and the channels through which cross-ownership influence corporate innovation.Based on this,in the empirical study,the relationship between the two was examined using all A-share listed companies from 2010-2019 as the research sample,with the number of cross-ownership as the explanatory variable and measures firms’innovation activities in terms of firm innovation inputs,outputs and firm innovation efficiency,concluding that the more cross-ownership a company has,the higher the investment in corporate innovation and the more efficient the firm’s innovation.After considering the sample self-selection problem and using Heckman two-stage regression and propensity score matching methods for validation,the conclusion remains the same.Further research shows that cross-ownership can promote corporate innovation efficiency by(i)alleviating financing constraints,(ii)reducing financing costs,and(iii)discouraging R&D manipulation.In addition,the promotion of innovation efficiency by cross-ownership is stronger when there is a higher degree of external marketisation.The research in this paper has important theoretical and practical implications.Theoretically,this paper enriches the topic of cross-ownership,enriches the factors that influence corporate innovation and contributes to the specific mechanisms of influence of chain shareholders on corporate innovation.Practically,the findings of this paper suggest that firms should value cross-ownership,especially when they face financing constraints and high financing costs,and that the resource advantages of cross-ownership can alleviate these constraints and ensure that firms have sufficient resources and willingness to undertake innovative activities.In addition,cross-ownership also provide insights into the implications for firms to improve their internal governance.