Firms and countries differ in terms of ownership structure. For example, in the US and UK the most dominant is the dispersed ownership structure with many shareholders, while in Europe it is more concentrated with a dominant corporate or family shareholder. Also, over the last decades, in the global economy, we have been observing a shift in the ownership structure. A significant proportion of firms are now owned by institutional investors from private equity (PE) industry. PE firms specialize in acquiring publicly listed firms, delist them and restructure at a profit. The goal of this research project is to study how ownership affects two types of innovation: radical and incremental. Radical innovations are defined as those that are undertaken close to the scientific base and are likely to be more radical and profitable than incremental innovations. Certain types of ownership might bring positive or negative effects on innovative activities. The main goal of the project is to determine the optimal ownership structure that nurtures innovative activity.
There are two alternative hypotheses on how ownership can affect innovation. On the one hand, certain types of owners might hamper innovative activity. Innovation is a risky activity and requires long-term commitment. If the owners are interested only in short-term profits, firms might not invest in the long-term projects due to short-term performance pressures (Stein, 1988; Graham et al. 2005; Bushee, 1998, 2001). Therefore, certain owners can expropriate firm’s resources and impede innovative activities. Alternatively, on the other hand, certain types of owners might enhance innovative activities. Owners can act as active monitors and encourage the management to invest in long-term projects that enhance innovation (Shleifer and Vishny, 1986; Kahn and Winston, 1998; Burkart et al., 1997; Gillan and Starks, 2000). Furthermore, certain owners might tolerate failure and reward long-term success (Manso, 2011; Aghion et al. 2013)
I will examine empirically the role of firm ownership on innovation. In particular, in order to identify the association between the ownership type and innovation I will perform regression analysis including control variables, year and industry fixed effects with clustered errors. Different owner types might in fact invest in the firms due to its innovative activity or due to other unobserved factors. This selection bias will affect the estimated coefficient. I intend to mitigate this bias in a number of ways by using 1) difference-in-differences (DID) research design; 2) matched sample, or 3) instrumental variable approach. Results of this project will augment the set of policy guidelines for firms and governments on how to actively promote innovative activities and speed up the rate of economic growth. My research has direct policy implications and it is in line with current Polish government priorities on innovative economy articulated in the Responsible Development Strategy. For example, it has direct implications on how to structure firm ownership in order to boost innovation. It will also enable better understanding of firm innovation activities by government officials and will help in designing regulations supporting innovation. The project will also set a guideline on how to avoid the middle-income trap and spur not only incremental innovation but will also provide guidelines on how to promote radical innovation that is crucial for stimulating long-run economic growth and achieving a socioeconomic balance. Part of the project will also be developed in co-operation with a firm from the corporate sector delivering Business and Innovation Consulting. The main goal of this co-operation will be to establish the key driving forces of innovation in Poland.
This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement No 665778, UMO-2016/23/P/HS4/04032 National Science Center, Poland.
Principal Investigator: Monika Tarsalewska, PhD
Project Research Partner: Jakub Growiec, PhD
dr Monika Tarsalewska
MSc in Finance with distinction from Lancaster University and MSc in Economics from University of Warsaw. In 2013 she submitted her doctoral thesis entitled “Dynamic Models of Mergers and Acquisitions” at Lancaster University. She is a Senior Lecturer on sabbatical leave at the Business School University of Exeter. She has teaching experience at undergraduate, postgraduate and MBA level. Her current interests include the effects of ownership changes on firm investment policies, corporate takeovers, private equity and venture capital, and innovation.She obtained a Fellowship to undertake a project on ownership and innovation at SGH Warsaw School of Economics, Collegium of Economic Analysis, Department of Quantitative Economics. The project is financed by European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 665778, National Science Center, Poland.
Dr Monika Tarsalewska participated in a conference on the innovativeness of Polish firms organised by SEG (Polish Association of Listed Companies) and CRIDO.
Dr Monika Tarsalewska took part in a panel discussion following the
presentation of the IMF report prepared in collaboration with EBRD:
"Reassessing the Role of State-Owned Enterprises in Central, Eastern, and
South Eastern Europe" http://ibs.org.pl/en/events/launch-of-the-imf-report/
presented by Christine
Richmond (Economist, IMF) and Peter Dohlman (Deputy Division
Chief at International Monetary Fund). Panel included: Jacek Jastrzębski (Chair
of the Board of the Polish Financial Supervision Authority, KNF), Grzegorz
Zieliński (Regional Director, Head of Central Europe and the Baltic States,
EBRD), Jan Rutkowski (Director of Policy Research at IBS).