Ownership Structure and Innovation Quality: Evidence from Patenting Activities

Abstract

High-quality innovation can provide companies with a competitive advantage in the market, enabling them to become leaders and effectively respond to challenges from competitors. This paper aims to offer recommendations to Chinese policymakers on enhancing innovation quality. It adopts a corporate governance perspective to examine the impact of ownership structure (ownership concentration, state ownership, institutional ownership, and managerial ownership) on innovation quality. Using patent data from Chinese listed companies from 2012 to 2021, the study reveals that innovation quality is influenced by different ownership structures. State ownership, institutional ownership, and managerial ownership positively affect innovation quality. Contrary to expectations, ownership concentration leads to a decline in innovation quality. This approach differs from previous research in two key aspects. First, it identifies ownership factors that enhance innovation quality, addressing the limitations of earlier studies that focused solely on single ownership types. Second, by focusing on invention patent information, it captures innovation quality, providing a more accurate assessment of firms’ true innovative capabilities in a transitional economy.