Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. and 2011, we find that the presence of institutional investors enhances firm innovation.Consistent with the monitoring view, we further find that (1) the effect of institutional investors on firm patenting mainly comes from mutual funds; (2) the effect is more pronounced when market competition is more intense; (3) the effect exists among private-and minor state-owned enterprises, but not among major state-owned enterprises.The above findings are robust when innovation quality is examined.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. and 2011, we find that the presence of institutional investors enhances firm innovation.Consistent with the monitoring view, we further find that (1) the effect of institutional investors on firm patenting mainly comes from mutual funds; (2) the effect is more pronounced when market competition is more intense; (3) the effect exists among private-and minor state-owned enterprises, but not among major state-owned enterprises.The above findings are robust when innovation quality is examined.

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Purpose The purpose of this study is to investigate the interplay between economic governance and privatization, and how these two instruments affect the entry mode choice of the foreign firm and the social welfare of the host country. Design/methodology/approach This study constructs a mixed duopoly model wherein one domestic public firm competes with a foreign firm and investigates the influence of economic governance investment on the domestic government’s optimal degree of privatization choice and the foreign firm’s entry mode choice. Findings This study shows that (1) better economic governance enhances the effect of privatization on output, thus resulting in a lower degree of privatization; (2) the optimal privatization policy of the domestic government is partial privatization irrespective of the foreign firm’s entry mode choice; (3) with optimal investment by the domestic government on economic governance, the optimal degree of privatization is higher under FDI than export, and the host-country welfare is also higher under FDI. In particular, this study demonstrates that better economic governance decreases the threshold of the degree of privatization when the foreign firm switches from export to FDI, implying that better economic governance stimulates the foreign firm to undertake FDI in the host country. Practical implications The findings shed some light on both the mixed ownership reform of the SOEs in China and attracting foreign capital inflow to improve the host country’s social welfare. Originality/value To the best of the authors’ knowledge, this study constitutes the first attempt to build a theoretical framework to explore how the interactions between economic governance and privatization influence the entry mode choice of the foreign firm.

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