Title

Rent appropriation of knowledge-based assets and firm performance when institutions are weak: A study of Chinese publicly listed firms

Publication Type

Journal Article

Publication Date

5-2016

Abstract

A firm's strategic investments in knowledge-based assets through research and development (R&D) can generate economic rents for the firm, and thus are expected to affect positively a firm's financial performance. However, weak protection of minority shareholders, weak property rights, and ineffective law enforcement can allow those rents to be appropriated disproportionately by a firm's powerful insiders such as large owners and top managers. Recent data on Chinese publicly listed firms during 2007-2012 were used to demonstrate that the expected positive relationship between knowledge assets and performance is weaker in transition economies when a firm's ownership is highly concentrated and its managers have wide discretion. Moreover, rent appropriation by insiders was shown to vary with the levels of institutional development in which a firm operates.

Keywords

research and development, rent appropriation, principal-principal conflict, managerial discretion, transition economies, China

Discipline

Organizational Behavior and Theory | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Strategic Management Journal

ISSN

0143-2095

Identifier

10.1002/smj.2522

Publisher

Wiley: 24 months

Additional URL

http://dx.doi.org/10.1002/smj.2522

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