Managerial ownership and corporate innovation: evidence of patenting activity from Chinese listed manufacturing firms

Pu, Tingqian; Zulkafli, Abdul Hadi Article Managerial ownership and corporate innovation: evidence of patenting activity from Chinese listed manufacturing firms Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Pu, Tingqian; Zulkafli, Abdul Hadi (2024) : Managerial ownership and corporate innovation: evidence of patenting activity from Chinese listed manufacturing firms, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-17, https://doi.org/10.1080/23311975.2023.2289202 This Version is available at: https://hdl.handle.net/10419/325903 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 Managerial ownership and corporate innovation: evidence of patenting activity from Chinese listed manufacturing firms Tingqian Pu & Abdul Hadi Zulkafli To cite this article: Tingqian Pu & Abdul Hadi Zulkafli (2024) Managerial ownership and corporate innovation: evidence of patenting activity from Chinese listed manufacturing firms, Cogent Business & Management, 11:1, 2289202, DOI: 10.1080/23311975.2023.2289202 To link to this article: https://doi.org/10.1080/23311975.2023.2289202 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. Published online: 12 Feb 2024. Submit your article to this journal Article views: 1863 View related articles View Crossmark data Citing articles: 8 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 ACCOUNTING, CORPORATE GOVERNANCE & BUSINESS ETHICS | RESEARCH ARTIClE Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2289202 Managerial ownership and corporate innovation: evidence of patenting activity from Chinese listed manufacturing firms Tingqian Pu and Abdul Hadi Zulkafli Finance section, school of Management, universiti sains Malaysia, Penang, Malaysia ABSTRACT Corporate innovation plays a crucial role in maintaining competitiveness and enhancing firm value. However, despite being the world’s leading manufacturing nation, the role of managerial ownership in fostering innovation within the Chinese manufacturing industry has not received adequate attention. Therefore, this research investigates the influence of managerial ownership on corporate innovation using data on patent activities from Chinese listed manufacturing firms covering the period from 2008 to 2021. Drawing on agency theory, empirical evidence confirms a positive relationship between managerial ownership and corporate innovation. This result remains robust across various tests, including the use of alternative dependent variables, the application of two-stage Data Envelopment Analysis (DEA) to control for managerial ability, correction of selection bias using Heckman two-stage estimation, and the utilization of Generalized Method of Moments (GMM) estimators. Additionally, the study clarifies the input channel and efficiency channel through whic-h managerial ownership positively influences corporate innovation. This paper contributes to the literature on corporate innovation by offering evidence for the role of managerial ownership on the innovation output. It also offers valuable governance insights for policymakers in emerging economies who are exploring corporate governance mechanisms for innovation systems, aiming to facilitate a systemic shift toward an innovative manufacturing economy. IMPACT STATEMENT Unlike most prior studies on corporate innovation, this research focuses on the manufacturing sector in China, investigating the impact of managerial ownership on innovation from the perspective of patent activities. It is noteworthy that this study employs the Data Envelopment Analysis (DEA) controlling for managerial ability, Heckman two-stage estimation correcting for selection bias, and the use of a dynamic panel GMM estimator to control for omitted variables and endogeneity of reverse relationships— factors rarely considered in previous research. Additionally, this paper elucidates three aspects through which managerial ownership fosters innovation (innovation input, innovation output, and innovation efficiency). Overall, this study holds crucial implications for both firms and policymakers, offering insights into enhancing the competitiveness and innovation value of the manufacturing industry through equity incentives. 1. Introduction It is widely recognized that corporate innovation is vital for sustaining competitiveness and enhancing firm value (Baer, 2012; Jun & Wang, 2018; Yuan & Wen, 2018). Given its pivotal role in driving competitiveness, numerous studies have explored the equity characteristics that incentivize such innovative behavior. From the perspective of innovation output, these attributes encompass factors such as state ownership (Zhang et al., 2022), institutional ownership (Rong et al., 2017), foreign ownership (Joe et al., © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group. CONTACT abdul Hadi Zulkafli [email protected]y Finance section, school of Management, universiti sains Malaysia, Penang, Malaysia https://doi.org/10.1080/23311975.2023.2289202 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY Received 18 October 2023 Revised 25 November 2023 Accepted 25 November 2023 KEYWORDS Managerial ownership; corporate innovation; agency theory; input channel; efficiency channel JEL CLASSIFICATIONS O31; O32; O38 REVIEWING EDITOR Collins Ntim, University of Southampton, United Kingdom of Great Britain and Northern Ireland 2 T. PU AND A. H. ZUlKAFlI 2019), and ownership concentration (Nguyen et al., 2021). However, there is a limited body of research that systematically investigates the potential of managerial ownership in promoting corporate innovation. This study aims to bridge this gap by exploring the impact of managerial ownership on corporate innovation within the Chinese manufacturing sector. Over the past few decades, China’s economic landscape has undergone a profound transformation, with its manufacturing sector output consistently securing its position as the world leader for 13 consecutive years, as of 2022 (Ministry of Industry and Information Technology of China, 2023). Even when confronted with an innovation crisis in international competition, managerial ownership remains a pivotal driving force in strategic decision-making, resource allocation, and the innovation process within Chinese manufacturing firms (Jun & Wang, 2018; Shan, 2019; Wen et al., 2022; Yuan & Wen, 2018; Zhang et al., 2022). In fact, the overall sample yearly managerial shareholding rates of Chinese listed manufacturing sector were analysed (Figure 1), and surprisingly, they are observed to greatly fluctuate and range between 5% and 20%. Thus, it increases the interest of this study in trying to unveil the intricate mechanisms through which managerial ownership influences innovation output. Although our empirical evidence is based on data from the Chinese listed manufacturing firms, we believe that the results of our study are also relevant to other emerging economies that share similar characteristics with China. Existing research has indicated that innovation projects face long-term risks of failure, which may have adverse implications for managers’ short-term personal interests and career prospects (Holmstrom, 1989; Iqbal etal., 2020; Joe et al., 2019). From the perspective of agency theory, innovation activities entail an agency conflict between the long-term interests of shareholders and the short-term personal interests of managers (Holmstrom, 1989; Salehi et al., 2018). To mitigate this conflict of interest, the amplification of managerial ownership aligns the interests of managers and shareholders, thereby reducing agency costs (Hirshleifer & Thakor, 1992; Jun & Wang, 2018; Nguyen et al., 2021). While theoretically, managerial ownership may be beneficial for corporate innovation, the mechanisms underlying this relationship remain unclear, particularly within the context of China. Figure 1. the trend of managerial shareholding rates in the Chinese listed manufacturing sector (2008–2021). note: the study has used the industry mean value for managerial ownership in this figure. COGENT BUSINESS & MANAGEMENT 3 In addition, with the presence of similar legal frameworks and standards in patent systems globally, patent data serve as a universally applicable indicator of innovation output (Higham et al., 2021). This study relies on patent data to gauge corporate innovation, facilitating international comparisons and competitive analyses among manufacturing firms worldwide. Specifically, this study verifies whether managerial ownership promotes corporate innovation and further investigates two channels through which managerial ownership influences corporate innovation. On the one hand, it examines whether managerial ownership enhances corporate innovation by increasing the firm’s research and development investment (referred to as the ‘input channel’). On the other hand, it scrutinizes innovation efficiency in comparing the level of patent output after controlling for research and development investment, providing further insights into the ‘efficiency channel’. This paper has some potential contributions. First, it enriches the growing body of literature concerning the economic implications of managerial ownership. Despite its significance as a corporate governance mechanism, empirical evidence regarding the relationship between managerial ownership and corporate innovation remains sparse. The closest study in alignment with our topic is Choi et al. (2011), which examined the impact of insider ownership (including the founders of firms and their families, affiliates, managers, executive directors, and employees) on innovation in 548 Chinese firms using data from 2001 to 2004. Informed by Choi et al. (2011), our research seeks to elucidate pathways that translate managerial ownership into exceptional performance in corporate innovation. Meanwhile, the study finds that increasing managerial ownership positively correlates with innovation input, innovation efficiency and innovation output. These findings further substantiate the influence of managerial ownership on firms’ innovation activities. Second, the positive impact of managerial ownership on corporate innovation provides nuanced evidence to the policymakers of emerging countries, which complements the literature on emerging countries’ innovative activities. In previous research little mention has been made of the roles of managerial ownership in innovating emerging countries, and this study has explored new insights into this area. It is also an important inspiration for emerging economies that are seeking to search for corporate governance mechanisms of innovation systems to make a regime shift to an innovative economy of the manufacturing sector. The paper is organized into the following parts: Section 2 presents the background. Section 3 briefly summarises the relevant theoretical literature. Section 4 provides a literature review and develops the hypotheses. Section 5 describes the data sources and methodology. Section 6 empirically tests the impact of managerial ownership on corporate innovation, sets out robustness checks and further analyses the influence mechanism. Finally, Section 7 concludes this study. 2. Research background 2.1 The crisis of innovation in the Chinese manufacturing industry Over the years, benefiting from the substantial advantage of the ‘demographic dividend,’ unique Chinese economic phenomena such as ‘Made in China’, ‘Smart Manufacturing in China’, and the label ‘World Factory’ have been enduring topics in discussions among economists and policymakers (e.g. Cai & Wen, 2012; Wang et al., 2021). What puzzled them was that within a mere nine years after China’s accession to the World Trade Organization on December 11, 2001, the output value of China’s manufacturing industry consistently ranked first globally from 2010 onwards. Some scholars contend that China’s success stems from its low labor costs and the vast domestic market, attracting global capital to invest in manufacturing facilities, thereby establishing itself as an indispensable force in the global manufacturing landscape (e.g. Ceglowski & Golub, 2012; Klafke et al., 2018). However, despite the colossal scale of its output, China’s manufacturing industry has historically operated at the lower end of the value chain (liu et al., 2022). The rapidly aging population and the swift rise in labor costs within China have intensified the innovation competitiveness crisis in its manufacturing industry (Zheng et al., 2023). An undeniable phenomenon is the escalating severity of labor cost increases, particularly among top management (Buck et al., 2008; Cheng et al., 2019). Given the crucial role that top management plays in shaping the innovation environment, formulating innovative strategies, and driving innovative projects, the manufacturing sector in China has adopted long-term 4 T. PU AND A. H. ZUlKAFlI incentives, including equity, to alleviate potential agency conflicts (Jiang & Kim, 2020). These distinctive governance practices, along with their underlying impact mechanisms, may differ from those in other developed economies. This unique governance environment provides a noteworthy dimension worthy of exploration for emerging economies. 2.2 Background of recent developments in innovation measurement Historically, the developments in innovation measurement have been a long-debated topic in the fields of technology and innovation management (Chiesa, 1999; Criscuolo etal., 2017). Some scholars advocate proactive exploration in measuring corporate innovation (e.g. Markham & lee, 2013). Scholars in this domain argue that developing multidimensional measures of innovation can assist managers in promoting structural causal relationships, ensuring comprehensive support, and effective execution of innovation. In contrast, others argue that the criteria for measuring corporate innovation may impede managers from pursuing breakthrough innovation outcomes, as it forces attention onto a singular metric (Abernethy & Brownell, 1997; Criscuolo et al., 2017). Corporate innovation, is a vital framework for significant improvements in products (goods or services), processes, and production methods within business practices, workplace organizations, or external relationships (Azeem etal., 2021; Tushman & Nadler, 1986). Most views emphasize that its measurement should encompass diverse information and processes (e.g. Abernethy & Brownell, 1997; Bessonova & Gonchar, 2017; Jia et al., 2019; lantz & Sahut, 2005). Typically, innovation activities involve inputs into innovation, the efficiency of transforming innovative elements, and the quality of innovative outcomes. Therefore, early measures of corporate innovation often focused on R&D inputs and innovation efficiency (Chen et al., 2017). A contentious issue lies in factors such as firm size, industry competitiveness, and innovation capabilities, which often determine the magnitude of R&D inputs and efficiency (Campbell et al., 2006; Machokoto et al., 2021; Sher & Yang, 2005; Tsai, 2005). Additionally, manipulation of R&D inputs can mislead the rationale for metrics based on R&D inputs and efficiency (Hsu & Hsueh, 2009). From the perspectives of invention and technology, there is a close connection between patent activities and innovation. Recent literature recognizes that the output of innovation itself is a specific stage in the innovation process, categorized into technological innovation and institutional innovation based on objects and incremental innovation and radical innovation based on degree (Chen & Kim, 2023; Coccia, 2016). The fundamental process of innovation includes: (1) input into innovation, i.e. the conduct of R&D activities; (2) intermediate innovation output, i.e. the formation of inventions, including the invention of patented applications; and (3) final innovation output, such as new products. The process of patent output is often the R&D results of scientific and technological research, indicating a close link between patents and R&D activities and expenditures, as extensively verified in empirical research (e.g. Hsu & Hsueh, 2009; Miguélez & Moreno, 2015). In addition, patent applications are usually pursued for commercialization purposes, involving high time and capital costs for application and maintenance, reflecting the applicant’s belief that applying for patents for specific technologies can yield anticipated returns (Cappelli et al., 2023; Mochly‐Rosen et al., 2023). In other words, applicants believe that patents have at least a potential role in economic development, leading them to invest in R&D and other innovation elements. When this potential role transforms into reality, patents become powerful evidence of innovation. At the same time, utilizing evidence from patent activities as a proxy for corporate innovation challenges previous conclusions about the determinants of corporate innovation. 3.Theoretical literature review As firm growth accompanies changes in corporate governance mechanisms, the separation of ownership and control emerges as a consequence of this phenomenon (Jensen & Meckling, 1976; O’Connor & Rafferty, 2012). According to agency theory, the governance process of a firm is not principal-driven but agent-driven, culminating in the manifestation of agency problems (Eriqat et al., 2023; Holmstrom, 1989; Shleifer & Vishny, 1986). Due to the incomplete monitoring of managers (agents) by shareholders COGENT BUSINESS & MANAGEMENT 5 (principals), a decline in shareholder power and a gradual enhancement of managerial authority ensue (Cohen et al., 2013; Hirshleifer & Thakor, 1992; Holmstrom, 1989). Corporate governance represents one of the mechanisms to alleviate agency problems between shareholders and managers in capital markets (Hirshleifer & Thakor, 1992; Pepper, 2018; Shleifer & Vishny, 1986). According to the perspective of Palia and lichtenberg (1999), information asymmetry motivates self-interested managers to shirk responsibilities or exploit firm resources for personal gain, such as pursuing salary allowances and in-job consumption. In such cases, with the amplification of managerial ownership, an incentive-compatibility effect emerges, as it frequently aligns managerial and shareholder interests more closely, diminishing managerial risk and consequently reducing agency costs (Jensen & Meckling, 1976; O’Connor & Rafferty, 2012; Zhang et al., 2018). Simultaneously, changes in firm equity structure enable managers to acquire a greater share of firm income from risky activities. Thus, when the alignment of managers’ interests with those of shareholders becomes more robust, they are more inclined to invest in projects that maximize firm value (laux & Ray, 2020; Morck et al., 1988). 4. Empirical literature review and hypothesis development The primary objective for shareholders when considering investment in innovation activities is to maximize the firm’s profits and achieve outstanding long-term performance (Bessonova & Gonchar, 2017; Iqbal et al., 2020). Nevertheless, managers have prerequisites such as job stability, a good personal reputation, and short-term income before achieving the aforementioned goal (Jensen & Meckling, 1976; Jun & Wang, 2018; laux & Ray, 2020). Meanwhile, there exists an information asymmetry between shareholders and managers, which leads to insufficient monitoring of managerial behaviour, resulting in conflicts of interest and agency problems (Cohen et al., 2013; Palia & lichtenberg, 1999; Salehi et al., 2018). On the one hand, one limitation to innovation caused by agency problems is the different investment motivations of managers. Compared to shareholders, managers have more advantages in terms of internal information within the firm, and they have the authority to decide whether to invest in conventional projects or riskier innovation activities (Jun & Wang, 2018). Prior research demonstrates that managers tend to make short-term investments to expand the size of the firm, thereby increasing their own compensation and privileges (Cohen et al., 2013; Palia & lichtenberg, 1999). This behaviour often serves the personal interests of managers, but sacrifices long-term profit opportunities for shareholders. On the other hand, one further limitation to innovation caused by agency problems is the different risk appetites of managers and shareholders. Due to risk aversion, managers often demonstrate management conservatism and intentionally steer clear of risky ventures, ultimately leading to a decrease in innovative output (Chen etal., 2020; Hirshleifer & Thakor, 1992; laux & Ray, 2020). Generally, the personal profit of managers is largely dependent on the performance of the firm they manage, especially when short-term performance affects their income and the risk of unemployment. High-risk innovation activities often encourage managers to avoid potential failures, thereby reducing their commitment (Chen et al., 2020; Jensen & Meckling, 1976; Jun & Wang, 2018; laux & Ray, 2020). In contrast, shareholders may have different risk appetites. According to Baer (2012), innovation contributes to the sustained achievement of outstanding firm performance and stimulates firm growth. This is why shareholders often favor firms that have research and development projects and are committed to long-term profitability (Cohen et al., 2013; Jun & Wang, 2018; Yuan & Wen, 2018; Zhang et al., 2018). Due to the share’s option-like characteristics, shareholders often favour risky projects, as the value of their shares may increase with the disclosure of innovation projects and attract market attention (Bai etal., 2023; He etal., 2022; Jun & Wang, 2018). Additionally, successful innovation projects may generate significant returns that shareholders can also share (Chen et al., 2020; Yuan & Wen, 2018; Zhang et al., 2018). However, these risks conflict with the personal interests of managers (Chiesa & Frattini, 2011; Jun & Wang, 2018). Conflicts of interest between managers and shareholders arise in innovation activities due to their varying investment motivations and risk appetites. Equity incentives are well known as a tool for the improvement of corporate governance that functions as an incentive to motivate managers to take risks and increase their efforts to align the interests of shareholders and managers (Chiesa & Frattini, 2011; 6 T. PU AND A. H. ZUlKAFlI Cohen et al., 2013; Cosci et al., 2015; Jensen & Meckling, 1976; Zhou et al., 2021). Therefore, managerial ownership can offer a benefit in innovation operation efficiency by encouraging managers to shoulder excessive risk and invest in long-term, innovative projects. This ultimately results in the alignment of shareholders’ and managers’ interests (Pepper, 2018; Salehi et al., 2018). Overall, the above discussion has led to the following hypothesis: H1: Ceteris paribus, managerial ownership has a positive impact on corporate innovation. 5. Research design 5.1. Data sources and sample This study obtained the ownership structure and financial information of all A-share Chinese listed manufacturing firms on the Shanghai and Shenzhen stock markets from the CSMAR database for 2008–2021, and patent information was sourced from the CNRDS database. Following the approaches of Yuan and Wen (2018) and Zhang et al. (2022), this study cross-verified with annual reports and official websites by the firm’s own information. Meanwhile, the data underwent the following preprocessing steps: first, ‘special treatment’ firms (referring to firms with continuous losses for two consecutive years and facing delisting risk) were excluded to avoid interference from abnormal financial conditions; second, observations with missing information were deleted to mitigate the impact of missing values on the results; third, to minimize the influence of extreme values, all continuous variables were winsorised at the 1st and 99th percentiles. 5.2. Variable measurement and model specification The dependent variable of this study was corporate innovation. Its measurement uses four patent volume pieces of information from the CNRDS database as the source of innovation level. It is a professional patent system covering a number of measurement sources and patent information data analysis. Following past studies (e.g. Ding et al., 2022; Iqbal et al., 2020; Yuan & Wen, 2018), the first measure, Patent_ total, represents the natural logarithm of a firm’s total patents applied for plus one, including invention patents, design patents, and utility patents. The second, Patent_invention, represents the natural logarithm of a firm’s invention patents applied for plus one. The third measure is Patent_ Gtotal, which is the natural logarithm of a firm’s total patents granted plus one. The fourth measure is Patent_ Ginvention, which is the natural logarithm of a firm’s invention patents granted plus one. It should be emphasized that the third and fourth indicators serve as measures of corporate innovation for robustness checks. The independent variable of our focus is managerial ownership (MO). Following the approach of Himmelberg etal. (1999), this study uses ratio variables to measure MO, the total equity holdings of top management, as a fraction of a firm’s total equity. In terms of control variables, following past studies (e.g. Ding et al., 2022; Jia et al., 2019; liu & lv, 2022; Yuan & Wen, 2018), this research controlled a series of variables that may be biased to corporate innovation, such as firm age (FA), firm size (FS), return on assets (ROA), financial leverage (lEV), cash ratio (CR), asset turnover (AT), sales growth (SG), and ownership concentration (OC). Moreover, this study also controls for the impact of firm and annual factors to capture the firm fixed effect and dynamics of changes in the macroeconomic conditions common to all firms over the sample period, respectively. Appendix A presents the definitions of all variables in this study. The following equation is used to investigate the relationship between managerial ownership and corporate innovation. Patent total Patent invention MO FA FS it it it i __ , ,, () =+ ++ αα α α 0 1 2 3 ,, , , , , ,, t it it it it it it ROA LEV CR AT SG OC Year + + ++ ++ + α α αα αα 4 5 67 89 ++ +Firm ε (1) where α 0 denotes the intercept, and αα 19 − are the coefficients to be estimated. This study added dummy variables that control for year and firm fixed effects (Year and Firm), ε is the error term, i denotes the cross-sectional dimension for firms, and t denotes the time series dimension. COGENT BUSINESS & MANAGEMENT 7 6. Empirical results and discussion 6.1. Descriptive statistics and correlation matrix Table 1 reports the distribution of dummy variables in the firm with managerial ownership over the sample period. In this table, it can be seen that more than half of the total sample of firms had managerial shareholdings within the period from 2008 to 2021. Across all observed years, firms with managerial ownership had the lowest proportion in the initial sample year of 2008, approximately 71.9%. The highest proportion occurred in the final year of our sample, 2021, reaching its peak at around 88.68%. The overarching trend indicates a gradual increase in the prevalence of firms with managerial ownership. Table 2 illustrates the descriptive statistics for the variables used in this research. For the patent application indicators, the mean and standard deviation for Patent_total (Patent_invention) are 2.979 and 1.571 (2.094 and 1.458), respectively. For the patent grant indicators, the mean and standard deviation for Patent_Gtotal (Patent_Ginvention) are 2.795 and 1.515 (1.386 and 1.250), respectively. These figures underline the considerable variation in innovation output among the sampled firms. On average over the 14 years of firm-level observations, managerial ownership (MO) is 17.352%. However, for some firms, managerial ownership could be as high as 73.266%. Regarding the control variables, the sample means include an average firm age (FA) of 2.816, firm size (FS) of 21.955, return on assets (ROA) of 0.051, financial leverage ratio (lEV) of 3.952, cash ratio (CR) Table 1. sample distribution. Year total Dummy (Mo)=0 Dummy (Mo)=1 Percentage (%) 2008 548 154 394 71.90 2009 592 155 437 73.82 2010 809 193 616 76.14 2011 1002 235 767 76.55 2012 1113 254 859 77.18 2013 1095 223 872 79.63 2014 1165 205 960 82.40 2015 1321 196 1125 85.16 2016 1477 218 1259 85.24 2017 1795 229 1566 87.24 2018 1854 213 1641 88.51 2019 1977 224 1753 88.67 2020 2283 269 2014 88.22 2021 2641 299 2342 88.68 total 19672 3067 16605 100.00 this table displays the distribution of the sample over the period 2008 to 2021. Table 2. Descriptive statistics. NMean std. Dev Min Max Panel a: Dependent variables Patent_total 20060 2.979 1.571 0.000 7.347 Patent_invention 20060 2.094 1.458 0.000 6.565 Patent_gtotal 20060 2.795 1.515 0.000 6.899 Patent_ginvention 20060 1.386 1.250 0.000 5.740 Panel B: independent variable Mo 19672 17.352 21.485 0.000 73.266 Panel C: Control variables Fa 20046 2.816 0.367 0.693 4.159 Fs 20046 21.955 1.151 19.539 25.852 Roa 18274 0.051 0.060 −0.285 0.280 LeV 20046 3.952 3.473 1.222 35.362 CR 20046 0.053 0.065 −0.178 0.308 at 18274 0.693 0.389 0.121 3.219 sg 18273 0.173 0.309 −0.533 2.680 oC 20046 34.291 14.231 8.448 77.018 Panel D: other variables Bs 20044 2.117 0.189 1.609 2.708 Bi 20044 37.479 5.331 25.000 57.140 Dual 20046 0.320 0.467 0.000 1.000 R&D 20060 0.023 0.018 0.000 0.121 This table displays descriptive statistics of the main variables defined in Appendix A covering the sample period 2008-2021. All continuous variables were winsorised at the 1st and 99th percentiles. 14 T. PU AND A. H. ZUlKAFlI Nevertheless, this study has several limitations. First, it measures corporate innovation solely using patent data, which serve as legal protection for the holder’s intellectual property. However, not all firms protect their technological assets and innovation through patents. Some may prefer to treat their expertise as a trade secret or implement organizational mechanisms to protect innovation. Second, the generalizability of the findings is limited by our use of one country as the research context. To tackle these limitations, future work should aim to address these limitations by considering more types of corporate innovation measures and adding other emerging economies. These extensions will further deepen our understanding of the impact of corporate innovation in emerging economies from a managerial ownership perspective. Acknowledgement The authors thank Collins G. Ntim (editor), and two anonymous reviewers for useful comments. Authors’ contributions Tingqian Pu: study conception, data collection, analysis and interpretation of results, and writing original draft. Abdul Hadi Zulkafli: theory, validation, methodology, revising it critically for intellectual content, supervision and project administration. Disclosure statement No potential conflict of interest was reported by the authors. About the authors Tingqian Pu is a Ph.D. candidate in Finance at the School of Management, Universiti Sains Malaysia. His research interests relate to international finance, corporate finance and innovation. Abdul Hadi Zulkafli is an Associate Professor of Finance at the Finance and Islamic Finance Section, School of Management, Universiti Sains Malaysia. He has a Master of Business Administration from the Universiti Kebangsaan Malaysia and a Doctoral degree from Universiti Malaya, Malaysia. His research interests focus on corporate finance and corporate governance. Informed consent statement Informed consent was obtained from all individual participants involved in the study. Funding This study did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. ORCID Tingqian Pu http://orcid.org/0000-0002-6618-5891 Abdul Hadi Zulkafli http://orcid.org/0000-0001-6087-1746 Data availability statement The data that support the findings of this study are available from the corresponding author upon reasonable request. References Abernethy, M. A., & Brownell, P. (1997). Management control systems in research and development organizations: The role of accounting, behavior and personnel controls. Accounting Organizations and Society, 22(3–4), 1–17. https:// doi.org/10.1016/s0361-3682(96)00038-4 COGENT BUSINESS & MANAGEMENT 15 Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. 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(iqbal et al., 2020; Yuan & Wen, 2018) Patent_invention the natural logarithm of firm’s invention patents applied plus one. (iqbal et al., 2020; Yuan & Wen, 2018)) Patent_gtotal the natural logarithm of firm’s total patents (invention, design and utility) granted plus one. (Ding et al., 2022) Patent_ginvention the natural logarithm of firm’s invention patents granted plus one. (Ding et al., 2022) Panel B: independent variables Managerial ownership (Mo) the total equity holdings of top management as a fraction of firm’s total equity. (Himmelberg et al., 1999) Panel C: Control variables Firm age (Fa) the natural logarithm of the number of years since the firm’s establishment plus one. (Liu & Lv, 2022) Firm size (Fs) the logarithm of total assets of a firm. (Ding et al., 2022) Return on assets (Roa) the net income of a firm divided by total assets. (Yuan & Wen, 2018) Financial Leverage (LeV) the total debts of a firm divided by total assets. (Yuan & Wen, 2018) Cash Ratio (CR) the cash holdings of a firm divided by total assets. (Yuan & Wen, 2018) asset turnover (at) the total revenues divided by total assets. (Yuan & Wen, 2018) sales growth (sg) the ratio of the operating income changed to the operating income in the last year. (Yuan & Wen, 2018) ownership Concentration (oC) the percentage of shares held by the biggest shareholder. (Jia et al., 2019) Panel D: other variables Board size (Bs) the natural logarithm of total number of board members. (Mcguinness et al., 2017) Board independence (Bi) the percentage of independent directors within the board. (Yuan & Wen, 2018) Ceo Duality (Dual) Dummy value equals 1 if Ceo and Chairman of the board are the same person. (Jun & Wang, 2018) Research and Development (R&D) the ratio of R&D investment to total assets. (Brick et al., 2006)