Social and Behavioral Sciences Commons^™

The Effects Of Corporate Governance On The Innovation Performance Of Chinese Smes, Yao Tang, Daniel Shapiro, Miaojun Wang, Weiying Zhang

Economics Department Working Paper Series

We investigate the degree to which corporate governance and ownership affects the innovation performance of firms in China with a particular focus on privately owned small and medium enterprises (SMEs). We hypothesize that (1) board-related governance measures will enhance innovation because they improve monitoring and provide access to necessary resources; (2) ownership concentration initially facilitates innovation because large shareholders are more likely to commit to the long-term nature of innovation, and have the incentive to monitor managers whose time horizon may be shorter; however we argue that these effects weaken as large shareholders becomes entrenched at higher levels of concentration; …