Summary:
In recent decades, the rapid global expansion of institutional investors has spurred growth in common institutional ownership, leading to research on its economic consequences. While extant research has primarily focused on the “collusion effect” and “synergistic governance effect”, this study explores an underexplored aspect: whether common institutional ownership facilitates the diffusion of innovation information among firms. Using patent citations as a proxy for innovation diffusion, we take the establishment of common institutional ownership linkages between a pair of firms as the research setting. Based on the data of China's A-share listed companies from 2007 to 2022, our difference-in-differences analysis shows that common institutional ownership increases patent citations among invested firms by an average of 7.77%, indicating a clear innovation information diffusion effect. Mechanism analysis suggests that this effect stems from institutional investors' capability and willingness to share information. Heterogenous tests demonstrate that the effect weakens when innovation information is more complex, institutional investors exert stronger influence in the industry, or intellectual property protection is weaker. Further research demonstrates that this diffusion effect enhances R&D investment, innovation output, and efficiency among invested firms. This study contributes to the literature in two ways. First, it enriches research on the economic consequences of common institutional ownership. While prior work has extensively studied these consequences, few have explored their role in innovation information diffusion—with Kostovetsky and Manconi (2020) as a notable exception. Our findings validate and extend their results by (1) examining both “capability” and “willingness” mechanisms, (2) showing how diffusion varies with innovation complexity, investor characteristics, and intellectual property protection, and (3) linking diffusion to R&D investment, output, and efficiency. These insights complement studies analyzing common institutional ownership's impact on innovation through “duplicate costs”, “technology spillover effects”, and “market competition effects” (Li et al., 2023; López and Vives, 2019; Antón et al., 2024). Specifically, we demonstrate that common institutional ownership boosts R&D investment and innovation performance via information diffusion, clarifying a key mechanism in its influence on innovation. Second, this study advances research on innovation information diffusion channels by introducing common institutional ownership as a direct pathway. Previous literature has focused on collaboration networks, director ties, or digital platforms, often inferring diffusion effects indirectly through innovation outcomes. In contrast, we establish common institutional ownership as an explicit diffusion channel, offering new insights into innovation information dynamics among Chinese listed firms. Our findings have important theoretical implications. First, institutional investors emerge as active facilitators of innovation information diffusion, extending beyond their traditional roles like providing funds and stabilizing the market. This provides fresh perspectives on their shareholder activism and outcomes. Second, from an organizational linkage perspective, we uncover how common institutional ownership creates new pathways for innovation information diffusion. Third, our results enhance understanding of business ecosystems, revealing that firms not only interact with supply chain partners but also form knowledge-sharing linkages with otherwise unrelated firms through common institutional investors. Finally, our findings suggest that when studying the innovation information diffusion effects of other entities, researchers should consider both the capabilities and willingness of the entities to share information, as well as contextual factors like information complexity and intellectual property protection. Our findings also yield practical and policy implications. First, policymakers could promote the development of common institutional ownership to enhance national innovation capacity. Second, policymakers could accelerate innovation diffusion and foster innovation by strengthening intellectual property protection. Finally, institutional investors need to enhance their industry-specific technical knowledge to transmit innovation information among portfolio companies more effectively.
刘慧龙, 苗小雨, 王一飞. 共同机构持股的创新信息扩散效应[J]. 金融研究, 2025, 540(6): 171-188.
LIU Huilong, MIAO Xiaoyu, WANG Yifei. The Effect of Common Institutional Ownership on Innovation Information Diffusion. Journal of Financial Research, 2025, 540(6): 171-188.
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