Essays on ownership and innovation

Zusammenfassung

We investigate three distinct ‘bridges’ between companies’ ownership characteristics and innovation. In the first chapter, we take an exploratory empirical approach to investigate the effect of going public on the risk-reward characteristics of the innovation portfolio. We argue that an IPO is a life-changing event that encompasses many changes that concur to impact the risk-reward characteristics of the innovation portfolio. However, we expect that an IPO is a more severe event for companies that were originated as new and independent entities, and remain independent till the IPO event – emerging growth companies – than it is for other companies – non-emerging growth companies. We find that going public does not affect the risk-reward characteristics of non- emerging companies. For emerging growth companies we find that the risk-reward characteristics of the innovation portfolio are: positively impacted by going public; and, negatively impacted by the percentage of shares offered at the IPO. In the second chapter, we investigate pharmaceuticals’ decision between acquiring and allying with a biotechnological, after recombinant DNA. The discovery of R- DNA represented an R&D competence-destroying event for incumbent pharmaceutical companies. As a response to that, organizational deals – namely, strategic alliances and mergers and acquisitions – have been extensively used as external sources of knowledge. We examine a potential determinant of pharmaceuticals’ decision between these two alternatives: the width of applicability of the internal knowledge of the biotechnological company. We find compelling evidence that it has a positive effect on the likelihood that the pharmaceutical company acquires (or merges with) that biotechnological company. In the third chapter, we examine the impact of SOX Section 404 on long-term investment of small innovative companies. We hypothesise that R&D intensity increases the impact of SOX 404 on long-term investment. Making use of a quasi- natural experiment, our results suggest that the impact of SOX Section 404 on companies’ long-term investment is uneven, favouring R&D intensive companies. This may call for a re-centring of policy discussion around the distribution of the net benefit of coercive financial disclosure programs versus the overall economic impact of those programs.