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| The Fund Investment Experience in Innovative Activities and Corporate Innovation |
| Li Yan1,Yuan Dongliang2 |
| (1. Business School,Nankai University,Tianjin 300071,China;2.School of Management,Lanzhou University,Lanzhou 730000,China) |
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Abstract Since 2003, China's investment funds have flourished and played an important role in stabilizing capital markets. As an important player in capital markets, funds are growing in management size. Are these growing funds simply taking advantage of their unique information and stock selection capabilities to seek excess investment returns? Or are they taking advantage of their shareholding strengths and governance experience to improve the governance performance of the underlying companies?#br#As an important part of a company's long-term strategy, innovative behavior often brings longer-term economic benefits and improves the economic and market performance of the company. In this context, stocks with a high probability of success and a high value of innovative projects are naturally the focus of investment funds. However, innovation activities are inherently associated with a high risk of failure and require the continuous investment of resources. If the innovation fails, the company will also face high losses. To increase the likelihood of success of the underlying innovation and seek higher investment returns, the fund management body will actively participate in the governance activities of the underlying company. The fund often holds shares of more companies, which allows it to establish investment partnerships with more companies and learn more about the success or failure of innovation from these targets.#br#The relationship between a fund investment experience in innovation activities and a focal company's innovation output is likely to be significant and positive, both based on the fund's stock selection path and the strategic embedding path. Fund companies with extensive innovation activity investment experience may either screen out innovation projects with a higher probability of success through efficient stock selection strategies, actively intervene in the innovation strategy decisions of the focal company, or provide the focal company with information or resources that can be used to help the focal company better carry out innovation activities and increase the likelihood of success of the focal company's innovation, effectively increasing the innovation output of the focal company. According to the knowledge base theory, it can be seen that when companies have rich knowledge reserves, they are more motivated to carry out innovation and have a higher possibility of innovation success, which means that the licensed patent holdings of focal companies can enhance the positive relationship between the fund's investment experience in innovation activities and the innovation output of focal companies. In addition, resource redundancy of the focal company can effectively enhance the promotion effect of external knowledge or information acquisition on the innovation output of the company. On the basis of resource-based theory, it can be inferred that resource redundancy of the focal company can enhance the positive relationship between the investment experience of the fund innovation activities and the innovation output of the focal company.#br#This paper empirically examines the impact of fund investment experience in innovation activities on corporate innovation by using A-share listed companies in Shanghai and Shenzhen from 2010 to 2021 as the research sample. The findings show that,first, funds with rich investment experience in innovation activities improve the innovation output of focal companies by providing them with experience to draw on. Second, focal firms with strong tangible resource reserves (resource redundancy) and intangible resource reserves (effective patent holdings) are able to better utilize the innovation experience provided by the fund, making the promotion effect of the fund's investment experience in innovation activities on their innovation output stronger. The third impact mechanism test shows that "resource provision" is the main path through which the fund's innovation experience promotes innovation in focal firms. #br#Compared with the existing studies, this study is innovative in the following aspects. First, from the "relationship" perspective and the knowledge base,it combines social networks and experiences and enriches the research on how previous "relationships" and knowledge work together with existing social networks and knowledge to contribute to the innovation output of enterprises. Second, this study distinguishes between the fund selection path and the resource transfer path, and deconstructs how fund managers' experience in investing in innovation projects of firms accumulated through previous or existing investment activities affects the innovation output of focal firms.#br#
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Received: 30 May 2022
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