Corporate Governance and Firm Innovation: Evidence from Italy

Purpose - The objective of this paper is twofold. On one hand it explores the relationship between a firm ownership structure and R&D, on the other it tests the relationship between the board structure and the investments in innovation. Design/methodology/approach - This investigation is based on a sample of Italian listed companies observed over the period 2005-2013. In particular, through a regression analysis, it will explore the relationship between ownership concentration and R&D, as well as the relationship between the characteristics of the board of directors and R&D. Originality/value - This methodology highlights both the relationship between the ownership structure and the expenditure on R&D and the relationship between board composition and R&D. If the research, on one hand, extends the extant literature on aspects of corporate governance and innovation, on the other it is rooted in the resource dependence and agency theory frameworks. Our findings appear of interest since a relationship has emerged between ownership concentration and R&D on one hand, and some dimensions of the Board of Directors and R&D on the other. Practical implications - The outcomes of the application, besides improving the current understanding of the relationship between firms' ownership structure, board characteristics, innovation and corporate performance, intend to reveal if the governance of Italian listed companies is efficient in determining company results and in pursuing growth through innovation. Moreover, our results could be of interest to both policy makers for the regulation of corporate governance and of BoDs, and to companies that regularly appoint the members of the board of directors.