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Public Governance, Corporate Governance, And Firm Innovation: An Examination Of State-Owned Enterprises, Nan Jia, Kenneth G. Huang, Cyndi Man Zhang

Research Collection Lee Kong Chian School Of Business

We examine how corporate and public governance shape an important type moral hazard in innovation which is that agents pursuing the quantity of innovation at the expense of the novelty. We theorize that both better corporate governance tools that regulate agents (including better alignment of agents’ private incentives and stronger monitoring), and higher-quality public governance that regulates the principals of state-owned enterprises (SOEs) reduce this moral hazard. Furthermore, we argue that higher-quality political governance enhances the functioning of better corporate governance tools in further reducing this moral hazard in innovation, thus creating interdependence. We test our theory in the context …