Title: Promoters' control and R&D investments: evidence from the Indian pharmaceutical industry

Authors: Shweta Sharda

Addresses: Department of Commerce, Indraprastha College for Women, University of Delhi, 110054, India

Abstract: Promoters play a crucial role in corporate innovation; they may encourage innovation for the long-term growth of the company or may reduce it to avoid risk. Based on conflicting perspectives of stewardship theory and principal-principal agency theory, the study aims to examine the impact of promoter ownership on R&D investments in a company and whether a high ownership stake or management position(s) held by promoters influences the said relationship. The paper empirically tests the hypothesis in a strongly balanced panel data set of 41 R&D-intensive Indian listed pharmaceutical companies over ten years from 2011 to 2020 using the fixed-effect regression model and sub-sample regressions. The results indicate a stronger negative effect of promoter controlling stake on R&D investments in high promoter-controlled firms, especially when the promoter holds the position of CEO and chairman. It suggests that R&D-intensive pharmaceutical companies reduce promoters' control in management to enhance monitoring of strategic decisions.

Keywords: promoter; CEO; chairman; board; ownership; R&D investment; innovation; risk; performance; India.

DOI: 10.1504/IJICBM.2023.133567

International Journal of Indian Culture and Business Management, 2023 Vol.30 No.1, pp.83 - 101

Received: 28 Dec 2021
Accepted: 21 Jun 2022

Published online: 21 Sep 2023 *

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