Employee ownership and firm R&D investment: evidence from China

Abstract

Purpose

As majority of studies of employee ownership (EO) take place in developed markets and primarily focus on the impact on firm performance, scholars have recently called for other markets, especially large developing markets to be considered, as well as alternative outcome measures.

Design/methodology/approach

Through the examination of the implementation of EO by Chinese listed firms during the period of 2011–2019 with total 3,473 firms and 21,204 observations, the authors provide empirical evidence on the positive effect of EO on firm R&D investment within the rapidly growing Chinese market.

Findings

The authors find that the adoption of EO promotes higher level of firm R&D investment. This positive relationship is more evident among small firms, non-state-owned firms and local state-owned-firms, compared with their counterparts. As for the plausible channels, the authors find that adopting EO provides a favorable institutional environment, which attracts more technical staff, improves workplace quality, and encourages job stability and greater employee effort, leading to greater R&D investment.

Originality/value

Though the connection between R&D investment/innovation and firm survival performance has been known for decades, the innovation side of outcomes has been ignored by EO research. Therefore, the authors explore the relationship between EO implementation and firm R&D investment within the rapidly growing Chinese market.

Citation

Ren, T., Xiao, Y., Pinto, D. and Yang, H. (2022), "Employee ownership and firm R&D investment: evidence from China", Journal of Participation and Employee Ownership, Vol. 5 No. 2, pp. 81-111. https://doi.org/10.1108/JPEO-02-2020-0004