Ownership concentration, innovation and firm performance: empirical study in Indian technology SME context

Abstract

Purpose

This study aims to understand the influence of R&D intensity and ownership concentration on performance of Indian technology SMEs, at the intersection of “value creation” perspective of corporate governance and country cultural context in innovation.

Design/methodology/approach

Cross-sectional data of 264 Indian technology SMEs have been employed to probe the impact of ownership and R&D intensity on market performance of the technology SMEs.

Findings

This study does not find support of individual influence of R&D intensity on SME performance. The authors find support for the “value creation” hypothesis of corporate governance in Indian technology SME context. This study finds that interaction of promoter's ownership concentration and R&D intensity has a positive influence on the performance of Indian technology SMEs.

Research limitations/implications

This study has deployed cross-sectional data. Future studies can examine the “value creation” hypothesis based on panel data for a long-run understanding. Ownership can be further segregated into different categories of ownership in future studies.

Practical implications

This study underscores on distinct necessity in the concentrated ownership in the context of Indian technology SMEs. The findings of the study may encourage policymakers to focus on the “value creation” of the technology SMEs than “value protection.”

Originality/value

This study aims to understand the market value of R&D practice of SMEs. The findings of this study establish that R&D intensity individually may not have any significant influence on SME performance. R&D intensity coupled with concentrated ownership can significantly increase SME performance. Thus, this study identifies factors that can help in SME innovation and growth options. Additionally, this study advocates for the fact concentrated ownership in technology SMEs of India by establishing the link with SME performance.

Citation

Chatterjee, M. and Bhattacharjee, T. (2021), "Ownership concentration, innovation and firm performance: empirical study in Indian technology SME context", South Asian Journal of Business Studies, Vol. 10 No. 2, pp. 149-170. https://doi.org/10.1108/SAJBS-10-2019-0185