Actual Controller's Industry Expertise and Company Innovation
The Ministry of Human Resources and Social Security recently released a guideline on supporting and encouraging inno-vation and entrepreneurship of professional and technical personnel,and local governments have also issued complementary policies to support the innovation and entrepreneurship of high-level talents and professional and technical personnel in order to implement the innovation-driven development strategy and promote mass entre-preneurship and innovation.The development of the aforementioned assistance programs is predicated on the idea that professional and technical personnel can establish businesses that can foster innova-tion.China has recently produced a number of world-leading private companies in the fields of photovoltaic,energy storage,communica-tions,and other technologies by relying on scientific and technolog-ical innovation and technological breakthroughs.The businessmen behind these great enterprises,such as Li Zhenguo of LONGi and Zeng Yuqun of CATL,have guided the enterprises to achieve sig-nificant technological breakthroughs and then to promote the trans-fer of these breakthroughs to other industries.However,no study has looked at the influence of the professional and technical back-grounds of corporate controllers on corporate innovation and their pathways from the standpoint of large-sample empirical evidence.This study examines the effects of actual controllers'industry expertise on corporate innovation from the perspective of fusing"capital"and"technology",drawing on research on the effects of individual experience on corporate behavior.The study finds that actual controllers with industry expertise can promote the compa-ny's innovation investment,and the combination of"capital"and"technology"is the most significant factor in determining an actual controller's industry expertise.The study hand-collected the indus-try expertise data of actual controllers of private listed companies on China's SME and GEM boards from 2007 to 2020.It has been discovered that"capital"and"technology"combined can signifi-cantly foster corporate innovation.The major ways in which actual controllers with knowledge of the sector have an impact on innova-tion are then explored in this study.The consumption of innovation resources by non-main business is somewhat inhibited when the ac-tual controllers of a company have industry expertise because they are more willing to focus on their main business rather than diversi-fy when making strategic decisions.In addition,as capital investors,the actual controllers with industry expertise have a better under-standing of the risks and uncertainties of innovation,which reduces the short-sighted behavior.Both of the knowledge and experience of the real controllers'prior education and employment are found to have contributed to the firm's innovation when we break down their industry expertise into their educational background and prior em-ployment.Further,from the perspectives of subjective motivation of actual controllers,governance power of actual controllers,and cap-ital constraints faced,this paper finds that the higher the degree of direct shareholding of actual controllers,the fact that actual control-lers also serve as CEOs,and the lower the degree of firm financing constraints,the more pronounced is the facilitating effect of actual controllers'industry expertise on firms'innovations.Finally,this paper compares the industry expertise of the actual controller with that of the CEO and finds that for China's small and medium-sized private listed companies,the actual controller is more important than the CEO's influence on the firm,and the actual controller with industry expertise essentially dominates the firm's innovations,and the inclusion of the actual controller's background in the research framework is necessary.This essay makes some contributions to business innovation.First,past research has shown that management shortsightedness and diversifica-tion are both significant inhibitors of long-term investment and innova-tion development in China's private companies.Controlling shareholders also exhibit R&D conservative behaviors.This study discovers that the combination of"capital"and"technology"can promote corporate in-novation when the actual controller has industry expertise,and it offers the corresponding path basis for the innovation body on how to promote corporate innovation to create new ideas.Second,most existing research focuses on the impact of the background experience of management and board of directors,such as"experience,knowledge and education",on corporate innovation.However,the fact that the hiring of technologists on boards and management is influenced by the will of the actual controller and that companies with higher levels of innovation are more likely to hire technologically expert directors makes the study subject to a reverse causation problem.Compared with the management and the board of directors,in China's private listed companies,the actual controllers hold a higher proportion of shares,and are often able to legally control the voting results in the process of appointing directors and management,or even control the entire board of directors and the management,by virtue of their equity advantages.In this case,the company's decision-making depends more on the personal will of the actual controller,and the traits of the controlling shareholders may have a decisive impact on the com-pany's innovative decision-making.This study examines the background of the actual controller,which is largely exogenous and less influenced by the enterprise's decision to innovate.It also provides an answer to the crucial question of who is in charge of innovation in China based on the country's current equity and governance landscape.Differentiating the influence of actual controllers with different background experiences on corporate behavior can expand and supplement the theory of the top echelon in China's private listed companies,where the actual controller has a higher shareholding ratio and is more involved in corporate deci-sion-making.In practice,actual controllers with industry expertise can promote cor-porate innovation by advancing the core business and curtailing man-agement's short-sighted behavior,where private companies rely more on technology innovation and market competition to create profits.To support private companies in becoming a source of innovation and devel-opment,encourage professionals and technical staff to create and launch enterprises and offer a specific level of financial support and policy pre-disposition to firms whose actual controllers have industry experience.The conclusions of this paper provide theoretical and practical evidence for the introduction of the policy,which encourages private companies to continuously acquire professional knowledge and skills at the cutting edge of the industry.This is helpful for maintaining the long-term com-petitiveness of the enterprise and achieving long-term success.
Actual ControllerIndustry ExpertiseCorporate Inno-vation
万方数据
维普
