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Do peer firms influence innovation?

Do peer firms influence innovation?
Do peer firms influence innovation?

Using a large sample of 4,545 US firms over the period 1968–2018, we find robust and significant positive peer effects on corporate innovation. Consistent with the need to keep ahead or abreast of rivals, we document an increase in peer firms’ influence with product market competition. Our further analyses show interesting leader–follower interactions with firms following or adopting innovation policies of counterparts perceived or likely to have superior information. This finding supports the information-based motives of mimicking. More importantly, we show that adopting peers’ innovation policies is associated with improvements in long-term innovation outputs and product market performance. Our results suggest that peer effects are a critical determinant of corporate innovation in addition to other factors examined so far in the literature.

Heterogeneity effects, Innovation, Peer effects, Product market competition
0890-8389
Machokoto, Michael
c7cbeeb7-34ba-48c9-aa3c-560eb24e97ec
Gyimah, Daniel
260cf797-7dda-4df4-ad01-3424d99197e4
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Machokoto, Michael
c7cbeeb7-34ba-48c9-aa3c-560eb24e97ec
Gyimah, Daniel
260cf797-7dda-4df4-ad01-3424d99197e4
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b

Machokoto, Michael, Gyimah, Daniel and Ntim, Collins (2021) Do peer firms influence innovation? British Accounting Review, 53 (5), [100988]. (doi:10.1016/j.bar.2021.100988).

Record type: Article

Abstract

Using a large sample of 4,545 US firms over the period 1968–2018, we find robust and significant positive peer effects on corporate innovation. Consistent with the need to keep ahead or abreast of rivals, we document an increase in peer firms’ influence with product market competition. Our further analyses show interesting leader–follower interactions with firms following or adopting innovation policies of counterparts perceived or likely to have superior information. This finding supports the information-based motives of mimicking. More importantly, we show that adopting peers’ innovation policies is associated with improvements in long-term innovation outputs and product market performance. Our results suggest that peer effects are a critical determinant of corporate innovation in addition to other factors examined so far in the literature.

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Accepted_BAR_29_January_2021 - Accepted Manuscript
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Accepted/In Press date: 29 January 2021
e-pub ahead of print date: 8 February 2021
Published date: September 2021
Additional Information: Funding Information: We thank Nathan L. Joseph and Alan Lowe (editors), and two anonymous reviewers for useful comments. We also thank Brian Bolton (PFMC 2018 discussant), participants at the 2018 Paris Financial Management Conference, and seminar participants at the University of Northampton, Coventry University, University of Aberdeen. The authors thank the University of Aberdeen, University of Northampton, and University of Southampton for financial support. Funding Information: We thank Nathan L. Joseph and Alan Lowe (editors), and two anonymous reviewers for useful comments. We also thank Brian Bolton (PFMC 2018 discussant), participants at the 2018 Paris Financial Management Conference, and seminar participants at the University of Northampton, Coventry University, University of Aberdeen. The authors thank the University of Aberdeen , University of Northampton , and University of Southampton for financial support. Publisher Copyright: © 2021 British Accounting Association
Keywords: Heterogeneity effects, Innovation, Peer effects, Product market competition

Identifiers

Local EPrints ID: 446268
URI: http://eprints.soton.ac.uk/id/eprint/446268
ISSN: 0890-8389
PURE UUID: 3243cab2-086f-49a5-bb73-bc3f0c99281d
ORCID for Collins Ntim: ORCID iD orcid.org/0000-0002-1042-4056

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Date deposited: 02 Feb 2021 17:52
Last modified: 17 Mar 2024 06:18

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Contributors

Author: Michael Machokoto
Author: Daniel Gyimah
Author: Collins Ntim ORCID iD

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