The catalytic effect of internationalization on innovation

This paper examines how internationalization spurs corporate innovation. Internationalization heightens the competitive environment of firms, while increasing financial flexibility. The increased competition reduces agency problems and motivates innovation projects which are supported by improved fi...

Full description

Saved in:
Bibliographic Details
Published inEuropean financial management : the journal of the European Financial Management Association Vol. 25; no. 4; pp. 942 - 977
Main Authors Chang, Ching‐Hsing, Chang, Ching‐Hung, Hsu, Pi‐Kun, Yang, Sheng‐Yung
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.09.2019
Subjects
Capital
competition
Corporate governance
Economic models
financial flexibility
Flexibility
Globalization
innovation
Innovations
internationalization
Mutual funds
technological appropriability
Online AccessGet full text

Cover

More Information
Summary:This paper examines how internationalization spurs corporate innovation. Internationalization heightens the competitive environment of firms, while increasing financial flexibility. The increased competition reduces agency problems and motivates innovation projects which are supported by improved financial flexibility. We obtain robust evidence with the difference‐in‐differences and instrumental variable approaches. The passage of antitakeover laws and the 1989 Loma Prieta earthquake are treated as exogenous variations to corporate governance; shocks on firm capital supply measured by mutual fund redemptions are also considered. A less positive finding is that internationalization motivates firms to focus on the appropriability of innovation rather than on basic research.
ISSN:1354-7798
1468-036X
DOI:10.1111/eufm.12190