Lower Your Weapon : Common Ownership and Innovation (Dis)Incentives

Common ownership by institutional investors disincentivizes patent-related innovation by significantly reducing the quantity, private value, originality, and generality of patents. Firms lower their patent weapons as competition is relaxed by common ownership. The disincentive impact is aggravated on firms facing intense product market competition; and is alleviated on firms with sufficiently high technology spillovers. Common ownership shows no significant impact on corporate R&D investment. Our study suggests that common ownership is unlikely to improve welfare by promoting R&D investment and patent-related innovation