Institutional ownership and corporate R&D investment: A multi-industry study

This paper describes a study of the effect of institutional ownership on corporate R&D investment for 133 companies in six U.S. industries over the time period 1965-1984. Whereas previous studies have been conducted at the industry level, this study shows that the relationship between institutional ownership and R&D investment varies by firm, and thus a proper analysis must be conducted at the firm level. In this study many firms exhibited no significant relationship between institutional ownership and R&D investment. Among the firms that did show significant relationships, more firms showed significant positive than significant negative relationships for the full 20-year period. For shorter and more recent periods the effect shifted toward an even balance between positive and negative effects. The study does not provide support for the hypothesis that higher levels of institutional ownership result in generally lower levels of R&D expenditure.