HOW FAMILY OWNERSHIP IMPACT ON PATENTING AS INNOVATION: EVIDENCE FROM CHINA

Abstract

This study investigates the impact of family ownership on corporate innovation, using evidence from Chinese manufacturing firms. Against the backdrop of China’s strategic shift toward indigenous innovation, we examine whether the concentrated, long-term orientation of family-controlled firms fosters or hinders patenting activity. Employing a panel dataset of approximately 3,800 A-share listed firms from 2015 to 2024, we measure innovation by the number of granted patents and family ownership by the percentage of equity held by the controlling family. To address endogeneity concerns, we utilize a Two-Stage Least Squares (2SLS) approach with a lagged ownership instrument, alongside baseline fixed-effects. The results consistently show a positive and statistically significant relationship: higher family ownership leads to greater patenting output, supporting the stewardship and socioemotional wealth perspective. The findings indicate that family firms’ patient capital and transgenerational outlook provide a governance advantage in pursuing innovation within China’s evolving institutional context. This research contributes to the literature on corporate governance and innovation in emerging economies, offering practical insights for policymakers aiming to leverage the private sector for technological upgrading and for family firms optimizing their innovation strategies.