Public Governance, Corporate Governance, and Firm Innovation: An Examination of State-Owned Enterprises

Innovation activities create substantial firm value, but they are difficult to manage owing to agency risk, which is commonly thought to result in shirking, and hence underinvestment in innovation. However, agency risk can also create inefficient allocation of resources among innovation activities, on which the literature has provided limited understanding. We examine an important outcome created by agency risk—that agents pursue quantity of...