Publication Type

PhD Dissertation

Publication Date



Innovation is vital to companies’ competitive advantages and is an important driver of economic growth. However, innovation is costly, since the innovation process is long, idiosyncratic, and uncertain, often involving a very high failure probability and great positive externalities .We thus launch the investigation from the following three aspects to explore how to create a better environment for producing innovation: Financing of innovation; dual-class share structure of innovation; and regulation and policy (e.g. SOX Act.)'s impact on innovation.

First of all, we study the effect of firms’ real estate collateral on innovation. In the presence of financing frictions, firms can use real estate assets as collateral to finance innovation. Through this collateral channel, positive shocks to the value of real estate collateral enhance firms’ financing capacity and lead to more innovation. Empirically, a one standard deviation increase in a firm’s real estate valuation is associated with an 8% increase in the quantity, quality, generality, and originality of its patents applied in the same year, and such positive effect is persistent over subsequent five years. The positive effect is more pronounced for firms that are financially constrained, dependent on debt finance, or belonging to hard-to-innovate industries. Our results suggest that corporate real estate collateral serves an important role in mitigating financial constraints, which leads to more innovation outputs.

Second, we try to explore how the dual-class share structure would affect the in production of innovation. Despite the risk of power abuse by corporate insiders with excessive control rights, technology companies are increasingly adopting dual-class share structures. In this paper, we show that such structures are negatively associated with corporate innovation measures. For dual-class firms, patents are increasing in Tobin’s Q, high-tech or hard-to-innovate industries, external takeover market threats or product market competition. Our findings are robust to reverse causality. To ensure that these findings are not the result of reverse causality, we examine a subsample of firms that switch from single-class

Third, we investigate whether innovation by publicly listed U.S. companies deteriorated significantly after the adoption of the Sarbanes-Oxley Act of 2002. Using data on patent filings as proxies for firms’ innovative activities, we find firms’ innovation as measured by patents and innovation efficiency dampened significantly after the enactment of the Act. The degree of impact is related to firm specific characteristics such as firm value (Tobin’s Q) or corporate governance (G-Index) as well as firms’ operating conditions (i.e., high-tech industries, delisted or not). We find evidence that SOX’s impact on firms is more pronounced for growth firms, firms with low governance scores, firms operating in high-tech industries or firms that continued to stay listed. Overall, the results suggests that the SOX has an unintended consequence of stifling corporate innovation.


Innovation, patents, Financing capacity, Real estate collateral, Financing constraints, dual-class, market conditions, corporate governance, Innovation, Sarbanes-Oxley, R&D expenditures

Degree Awarded

PhD in Business (Finance)


Corporate Finance


CAO, Xiaping


Singapore Management University

City or Country


Copyright Owner and License

Singapore Management University

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.