Do peer firms influence innovation?

Michael Machokoto, Daniel Gyimah* (Corresponding Author), Collins Ntim

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

40 Citations (Scopus)
4 Downloads (Pure)

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.
Original languageEnglish
Article number100988
Number of pages21
JournalBritish Accounting Review
Volume53
Issue number5
Early online date8 Feb 2021
DOIs
Publication statusPublished - Sept 2021

Bibliographical note

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.

Data Availability Statement

Supplementary data to this article can be found online at https://doi.org/10.1016/j.bar.2021.100988.

Keywords

  • Research and development
  • innovation
  • peer effects
  • product market competition
  • heterogeneity effects
  • Innovation
  • Product market competition
  • Heterogeneity effects
  • Peer effects
  • Research and development (R&D)

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