How do foreign institutional investors enhance firm innovation?

Luong Hoang Luong, Fariborz Moshirian, Lily Nguyen, Xuan Tian, Bohui Zhang

Research output: Contribution to journalArticlepeer-review

173 Citations (Scopus)


We examine the effect of foreign institutional investors on firm innovation. Using firm-level data across 26 non-U.S. economies between 2000 and 2010, we show that foreign institutional ownership has a positive, causal effect on firm innovation. We further explore three possible underlying mechanisms through which foreign institutions affect firm innovation: Foreign institutions act as active monitors, provide insurance for firm managers against innovation failures, and promote knowledge spillovers from high-innovation economies. Our article sheds new light on the real effects of foreign institutions on firm innovation.
Original languageEnglish
Pages (from-to)1449 - 1490
Number of pages42
JournalJournal of Financial and Quantitative Analysis
Issue number4
Publication statusPublished - Aug 2017
Externally publishedYes


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