Pension Fund Investment and Firm Innovation
By Cédric Schneider, Dario Pozzoli & David Pinkus
We use a unique database on domestic pension fund investment to analyze the relationship between pension fund investment and innovation within Danish firms. We find a significant positive association between pension fund investment and various measures of innovation, including green technologies for climate change mitigation and adaptation. However, this relationship is much weaker in highly competitive industries,suggesting that pension funds encourage innovation by monitoring and holding managers accountable. Our analysis also shows that pension funds foster innovation by providing stable long-term capital. Overall, our study highlights the important role of pension funds in driving firm innovation, particularly by reducing managerial slack and by supplying stable, long-term capital.
Source SSRN
