Can stakeholders’ attention to innovation promote corporate innovation?

What is it about?

Given the significance of innovation in enabling firms to maintain a long-term competitive edge and secure excess profits, this paper aims to investigate whether and how stakeholders' attention to innovation (SATI) influences corporate innovation. Based on the text data obtained from Hudongyi, this paper introduces a new variable, SATI, which is constructed by categorizing stakeholders’ questions into two groups: those related to innovation (considered as stakeholders’ attention to innovation) and those related to other aspects (considered as stakeholders’ attention to other aspects). This categorization is done using textual analysis methods. The findings indicate that SATI has a significant positive effect on corporate innovation. This causal relationship remains even after accounting for potential endogeneity issues using the instrumental variable approach. Moreover, this study reveals that the positive effect of SATI on corporate innovation is more pronounced for firms facing greater financing constraints and those with lower risk-taking levels. These findings suggest that SATI can promote corporate innovation by alleviating financing constraints and encouraging risk-taking, thereby supporting the financing constraints hypothesis and the innovation failure tolerance hypothesis, respectively. Additionally, SATI significantly positively impacts both corporate innovation output and efficiency, thereby ruling out the catering hypothesis.

Featured Image