Melco Management Accounting Research
Discussion Paper Series
No.MDP2019-001

Family Control and Corporate Innovation in Stakeholder Oriented
Corporate Governance: Evidence from Japan

January 2019

Hideaki Sakawa*
Associate Professor, Nagoya City University, Graduate School of Economics
1 Yamanohata, Mizuho-cho, Mizuho-ku, Nagoya 476-8501, Japane-mail: sakawa@econ.nagoya-cu.ac.jp
Naoki Watanabe
Associate Professor, Nagoya City University, Graduate School of Economics
e-mail: naoki-watanabe @econ.nagoya-cu.ac.jp*Corresponding author

The Melco Foundation
Nagoya, Japan
Discussion Paper Series of the Melco Management Accounting Research, in order to promote
the study of management accounting, has published this unfinished paper onto the Web. Pleaseobtain the permission of the author when citing this paper.

Family Control and Corporate Innovation in Stakeholder Oriented
Corporate Governance:
Evidence from Japan
Hideaki Sakawa
Naoki Watanabe
Abstract
This study investigates the effects of family control on corporate innovation activity in publiclytraded firms in Japan under stakeholder-oriented corporate governance. In a sample of 14,991 firmyear observations in publicly-traded firms in Japan during the period of 2007 to 2016, we tested
whether family owners or board members are enhancing research and development investments.
While theoretical perspectives of principal-principal conflicts generally assume a negative
relationship between family control and research and development intensity, we find a positive
relationship, which supports the stewardship theory perspective. Additionally, we find that mainbank ownership positively moderates the relationship between family control and research anddevelopment, which suggest that the main bank could affect the decision making of family board
members in the long-term. This result is supported by the close relationships between the main bankand client firms. Furthermore, our study reveals that the shareholder orientation of foreign
shareholders suppress family board members’ long-term orientation. We conclude that the
exploitation presumed by principal-principal conflict perspectives have not been thoroughly
investigated in Japan’s stakeholder oriented corporate governance system.
Keywords: Corporate Innovation; Principal-Principal Conflicts; Stewardship Theory; Main BankThis research was financially supported by Melco Foundation and Grant and the Japan Ministry of

Education, Culture, Sports, Science and Technology, Grants-in-Aid for Young Scientists (A),Grants-in-Aid for Scientists (B), and Grants-in-Aid for Scientists (C).
 Corresponding author. Telephone number: +81-52-872-5724, Fax number: +81-52-872-5724, E-

mail address: sakawa@econ.nagoya-cu.ac.jp (H. Sakawa)1. Introduction
Corporate innovation is crucial to a firm’s competitive advantage and sustainable development andare often influenced by the corporate expenses of research and development (R&D) activities.
Despite a global increase in the number of family-controlled public firms during recent decades(Ahlstrom, 2010; Nordhaus, 1996), the effects of family control on value creation through R&D
have not been clearly defined (Peng & Jiang, 2010). From a family control perspective, family
owners (instances where the corporate entity is controlled by a specific family due to their large
number of shares in the company) tend to maintain control of their firms (Gomez-Mejia et al., 2007).
Additionally, family-controlled firms may not always place a lot of emphasis on the importance ofinvesting in R&D (Morck &Yeung, 2003). The objectives of a family-controlled firm is expected
to have negative effects on R&D investment (De Massis, Frattini, & Lichtenthaler, 2013). Family
owners do not tend to be favor of R&D investment to realize long term growth (Lee & O’Neill,2003). Conversely, agency theory suggests that concentrated ownership is likely to promote
innovation activity because large shareholders have strong incentives to monitor management andto promote innovation strategy and growth.(Jensen & Meckling, 1976)1. Several empirical studies
find that family-control can affect a positive influence on firm innovation (Lichtenthaler & Muethel,2012, Naldi et al., 2007).
As discussed above, there are two conflicting theoretical perspectives concerning the effect offamily control on R&D investment. Stewardship theory (Davis, Schoorman, & Donaldson, 1997)
states that controlling family board members act like stewards, because they have long tenures andsocio-emotional relationships with the firm. In their role as stewards, family board members mostoften focus on the continuity of the business and on maintaining close relationships with the various
stakeholders of the firm (Miller, Le Breton-Miller, & Scholnick, 2008). From the perspective ofstewardship theory, this responsibility means that R&D investment would likely be facilitated infirms with controlling family board members. Conversely, principal-principal conflicts (Young et al.,2008) imply that possible conflicts between family members and minority shareholders could affectfirm decision making, for instance R&D investment decisions. In other words, controlling family
members focus on their self-interests and exploit the firm wealth, as well as that of minority
shareholders (Block et al., 2013). Furthermore, several empirical studies show that family ownership
could discourage innovation due to lower long-term R&D investment (Block, 2012; Block et al.,2013).
Referring to existing literature, the relationship between family control and corporate
innovation have mainly been investigated from the perspective of emerging economies. Amongdeveloped economies—countries such as the United States and the United Kingdom—previous
1

The two conflicting perspectives are summarized in Gersick et al. (1997).
1

studies have focused on dispersed ownership structures (David, Hitt, & Gimeno, 2001; De Massis
et al., 2013; Hoskisson, Hitt, Johnson, & Grossman, 2002). There are few studies that haveinvestigated the relationship between stakeholder orientation and corporate governance in countries
like Japan.
This study focuses on Japanese publicly-listed family-controlled firms to discover whether
family owners or board members are enhancing R&D investments. According to Yoshikawa andRasheed (2010), a higher dividend payout in Japanese family-controlled firms imply that there might
be no exploitation of family owners. Their study supports the stewardship theory in Japanese family
firms, but does not reveal whether or not corporate innovation is promoted within family-controlled
Japanese firms. This provides another reason for this study to focus on the effect of Japanese family
owners towards R&D investment. Furthermore, two major principals in Japanese corporate
governance are addressed—main bank and foreign shareholders—to monitor for the behavior offamily board members (Yoshikawa & Rasheed, 2010). There are many ways in which family board
members can exploit other shareholders, such as higher executive salaries and perks for family
executives, self-dealing, and investments in other family-owned firms. Therefore, the monitoring offamily board members is an important task which falls to monitors such as the main bank and foreign
shareholders.
This study uses panel data of Japanese publicly listed firms during a study period of ten-years,
2007 to 2016. In the analysis, we adopt R&D intensity as the source of corporate innovation. The
results provide three insights. First, R&D expenses are higher in family-controlled firms. Thissuggests that family board members are stewards for these publicly listed firms and do not exploit it.
Second, the main banks contribute to the increase in R&D expenses in their family-controlled client
firms. This could be due to main banks having privileged information concerning client firms andsupporting the long-term orientation of family board members. Third, foreign shareholders profit
distribution rather than higher R&D expenses for the future growth of the firms, because they wanthigher dividend payouts (Sakawa and Watanabel, 2018a).
The remainder of this study is organized as follows. The next section explains the theoreticalbackground and the development of our hypotheses. We then explain the data and methodology ofthe study. The following section presents descriptive statistics and estimation results, followed by adiscussion of the findings. Finally, we conclude the study.
2. Theory and Hypothesis Development
2.1. Theoretical background
Corporate governance is closely related to corporate innovation activity. Corporate innovations
are facilitated by the disciplines of shareholder-oriented corporate governance (Hill & Snell, 1988;
Hoskisson & Hitt, 1988; Lee & O’Neill, 2003; Fama & Jensen, 1983). La Porta, Lopez-de-Silanes,2

Shleifer, and Vishny (1998) showed that family board members within family-controlled firms tend
to exploit their wealth and do not realize appropriate resource allocations because of insufficientmonitoring mechanisms within the firm. This type of exploitation by family board members ischaracterized as principal-principal conflicts and are observed in many emerging economies (Younget al., 2008).
Principal-Principal conflicts is a matter of concern from the perspective of corporate strategy,
since it leads to lower firm performance (Chen & Young, 2010, Young et al., 2008). In the case offamily board members being risk averse or when they use firm resources for their own private
benefit, a firm’s R&D investment would not be adequately developed. This may result inunderinvestment, which will, in turn, lead to financial underperformance problems (Le BretonMiller et al., 2011). Concerning large publicly-traded Japanese firms, these types of conflicts infamily-controlled firms have not been appropriately investigated (Yoshikawa & Rasheed, 2010).
This implies that family-controlled leadership in Japan functions well according to the monitoringmechanisms of stakeholder orientation in corporate governance.
2.2. Research Context
There are context-dependent corporate governance systems in strategic management (Chang,
Chung, & Mahmood, 2006; Oliver, 1997; Peng, Wang, & Jiang, 2008). The Japanese economy islargely known as a capitalist economy but has been characterized differently from other developed
economies, such as the United States. The Japanese system is based on debt-financing and isconnected by bank systems and tightly interconnected networks among firms, their trading partners,
and other financial institutions (Ahmadjian & Robbins, 2005). These features are sources of different
strategic preferences and the resultant resource development of Japanese companies (Neelankavil &Alganar, 2003; Porter, 1992). This system means that market-based corporate governance systems
are not always managed effectively. However, their disciplinary mechanisms largely contributetowards improving firm performance. Although family-controlled firms could be criticized due totheir perceived expropriation (La Porta et al., 1998; Young et al., 2008), it is a relevant function, as
strategic future investment is induced by their long-term orientations.
This study focuses on large publicly listed family-controlled firms. Despite their efforts,
previous studies have not been able to determine whether the German-Japanese model with aconcentrated ownership structure can alleviate principal-principal conflicts (Young et al., 2008).
Considering stakeholder oriented corporate governance in Japan (Yoshimori, 1995), bankmonitoring may be able to prevent the possible exploitation of firm resources and dividends caused
by under-investment.
This study also analyzes the interaction effect of foreign shareholders on the relationshipbetween the family control of a firm and its R&D investments. We suggest that foreign shareholders
3could play an institutional reformative role to mitigate principal-principal conflicts (Young et al.,2008). From this perspective, foreign shareholders play the role of enhancing firm value in Japanesefirms, as they are interested in financial performance, have a shareholder-oriented view that focuseson maximizing firm value (Desender et al., 2016), and influence managerial decisions concerning
firm restructuring (Ahmadjian and Robbins, 2005). The presence of foreign shareholders withshareholder-oriented views have increased since the financial deregulation in Japan. This is known
as the transition era of corporate governance in Japan (Chizema and Shinozawa, 2012).
2.3. Family Control
A firm’s ownership heterogeneity can influence its business strategy due to different degrees of risk
aversion and incentive (Chrisman & Patell, 2012). According to the stewardship theory (Davis et al.,1997), controlling family board members tend to act like stewards. These family board members
will manage the organization with its best interest in mind, because they subordinate their personalgoals and promote family goals, abiding by relational contracts that determine family firmmanagement (Corbetta & Salvato, 2004). Family board members also build long-term relationships
with the various stakeholders of the company, which in turn promotes improved R&D investments
and corporate innovation (Miller et al., 2008). Tsai et al. (2006) stated that the agency theory
perspective is not suitable for Taiwanese family firms. Asian collectivism and Western
individualism cultures are opposed (Hofsted, 2007). In addition, long-term orientation is strongly
observed in Asian countries like China, Hong Kong, Taiwan, Japan, and Korea (Hofsted, 2007).
Therefore, family members adopting stewardship roles are expected in Asian collectivism cultures
like Taiwan and Japan (Sakawa and Watanabel, 2018b).
On the other hand, family firms may be exploited by principal-principal conflicts, as previously
stated (Young et al., 2008). When family members appropriate resources from the firm, theresources available for building the capabilities of the firm decrease (Le Breton-Miller & Miller,2009). Furthermore, nepotistic tendencies in controlling family members may cause severe agency
problems within a firm, which can harm corporate innovation. Nepotism in family-controlled firms
refers to board members appointing family members as CEOs or executives in the boards. Due tonepotism, highly talented employees offering knowledge and experience in R&D may leave andtalented individuals from outside the firm many hesitate to join the firm (Chen & Hsu, 2009).
Concentrated ownership structures are very common in in Japanese family-controlled businessgroups and these structures are arranged to enhance the family members’ collective economic
welfare (Dela-Rama, 2016, Colpan and Hikino, 2010).
Whether family members in management positions are agents or stewards has been the subjectof several studies (Anderson & Reeb, 2004; Chrisman, Chua, Kellermanns, & Chang, 2007).
Additionally, evidence of agency problems in family firms—where family members act as agents
4

rather than stewards—are reported by Gomez-Mejia, Nunez-Nickel, and Gutierrez (2001) and
Schulze et al. (2001). Family influence, involvement, and control—resulting from the partial
ownership of a firm—are indeed factors which are part of a complex phenomenon with both positive
and negative consequences for the organization in question (Eddleston & Kellermanns, 2007).
Japanese corporate governance is known as a stakeholder-oriented system (Yoshimori, 1995),
and—more often than not—in a family-controlled firm, family board members do not exploit thefirm, but rather contribute toward the growth of the firm (Yoshikawa & Rasheed, 2010, Sakawa &Watanabel, 2018b). Therefore, the long-term plans of Japanese top managers in family-controlledfirms would include the development of the firm’s R&D. Based on the above, we present thefollowing Hypothesis:
Hypothesis 1: Firms with family board representation are more likely to increase R&D
expenses than firms that are not family-controlled.
2.4. Bank Ownership Monitoring and Family Control
Most Japanese firms pursue diversification as a growth strategy. The success of Japanese firms
in the post war period depended on their sustained commitment to R&D (Kono, 1984).
Commitment to R&D depends upon both a long-term orientation and a willingness to bear the risks
involved in R&D strategies. Their commitment to long term business relationships are likely to
mitigate the importance of profit as well as a decline in current profits (David, O'Brien, Yoshikawa,& Delios, 2010). These short-term outcomes are supported by long and stable ownership structuresthat do not seek short-term profitability, compared to companies from the United States (Porter,
1992). Specifically, the main banks have a close relationship with their client firms and have always
played an active monitoring role concerning Japanese firms (Aoki, 1990; Sheard, 1989). The mainbanks gather information by utilizing bank-appointed monitors and their incentives are provided(Colpan & Yoshikawa, 2012). These banks gather enough information concerning the financial
health of client firms to enable them to prompt their client firms regarding investment for future
growth by the family board members of the firms. This means that the main banks want their client
firms to increase their R&D investment to promote future growth.
Furthermore, banks provide credit to their client firms under the Japanese stakeholder
orientation corporate governance system. Therefore, banks can influence firms’ decisions throughcapital supply to the family-controlled firms. The positive relationship that we suggested between
increasing family control within firms and R&D investment will become stronger as bankownership increases. Hence, we present our next Hypothesis.
Hypothesis 2: Main banks positively moderate the relationship between family control and
R&D expenses.

52.5. Foreign Ownership Monitoring and Family Control
Japanese ownership structures divide shareholders into two different types called “relational
owners” and “transactional owners.” These two groups hold different views concerning corporate
strategy (David et al., 2010). The former group represents banks and domestic investors that haveclose relationships with their firms. The latter group consists of foreign shareholders who have a“shareholder-oriented” viewpoint and a more distant relationship with the company. This group is
expected to mitigate agency conflicts in publicly-traded corporations (Desender et al., 2016).
The attitudes of foreign shareholders differ from those of the main banks, as they prefer a higher
current dividend payout instead of future profits (Gedajlovic, Yoshikawa, & Hashimoto, 2005). As
stated above, foreign shareholders have an “arm’s-length” relationship with the firms in which they
are stakeholders and require higher investment returns (Jackson & Moerke, 2005). Therefore,
foreign shareholders provide managerial incentive to the firm for shorter term financial performance(Sakawa, Moriyama, & Watanabel, 2012). Thus, the managers of firms with higher foreign
shareholdings are continuously under pressure to improve financial performance. It is quite clear that
foreign shareholders are not likely to advocate an increase in R&D investment for the future growthof firms, meaning that the negative relationship we implied between increasing family control andR&D investment will become stronger as foreign ownership increases. This leads to our Hypothesis.
Hypothesis 3: Foreign shareholders negatively moderate the relationship between family
control and R&D expenses.
3. Data and Methodology
The data were gathered from the Nikkei Needs CGEs database, which contains corporate
governance methods and characteristics of firms listed in the Tokyo Stock Exchange (TSE). The
sample consists of publicly listed firms in the first section of the Tokyo Stock Exchange and excludes
financial firms. Our final sample consists of 14,991 firm-year observations during the period of 2007
to 2016. Our dependent variable is R&D intensity, calculated by the ratio of R&D expenditure tototal sale.
In our attempt to prove our hypotheses, we measure family control dummy variables using thesame criteria used by Yoshikawa and Rasheed (2010). We adopt family board representation as aproxy for family control. Next, we looked for the largest number of family shareholder names among
the general top 10 shareholder names, after which we searched for the names of directors with thesame family name as that of the largest family shareholders. Based on this method, we assume thatfamily-controlled firms are those firms that have a director (or directors) that share a family namewith family shareholders on the board, for the purposes of this study.
Our independent variables are as follows: we define the main banks as the largest lenders to theirclient firms (Aoki, Patrick, & Sheard, 1994). Therefore, the main bank shareholding represents the6shareholdings of the largest lenders divided by total outstanding shares, following Hoshi et al. (1990)
and Morck et al. (2000). Foreign ownership is measured as the shareholdings of foreign shareholders
divided by the total outstanding shares. Leverage is measured as the debt to asset ratio, which
controls for the firm’s interest payment cost produced by larger amounts of debt. Firm size is definedby the logarithm of a firm’s assets. Growth rate of sale (Growth Sales) is adopted as a proxy of firm
growth. Cross Ownership is the percentage of shares of mutual shareholdings. Our study also
includes year dummies and industry dummies based on the industry classification of the TSE tocapture time variation and cross industry variation.
4. Empirical Results
Our descriptive statics and the correlation of the variables are shown in Table 1. The results ofour empirical analyses concerning family board representation and interaction terms are given in
Table 2 and Table 3 respectively. Table 2 indicates the estimated results of family control on R&D
intensity. Table 2 also shows that family board representation would enhance R&D intensity,
consistent with Hypothesis 1. This means that family board members are more likely to contributeto the future growth of the firm by promoting R&D intensity. It also implies that family board
members function as stewards in the family-controlled firm, rather than agents.
Insert Table 1 and Table 2 about here
Additionally, we find a positive relationship between main bank ownership and family board
representation, which confirms Hypothesis 2. This finding suggests that the main bank would
contribute toward an increase in R&D intensity proposed by family board members. Particularly,
the long-term relationship between the main bank and family-controlled firms would support afamily board member’s long-term plans. Concerning the relationship between foreign shareholders
and family board representation, we find a significant and negative relationship, which is consistent
with Hypothesis 3. This suggests that foreign shareholders would advocate more frequent dividend
payouts, rather than the uncertainty of R&D investment for future growth.
We also confirmed the robustness of results concerning the GFC (Global Financial Crisis)
period of 2007-2008, since the significant corruption of the global financial market during the GFC
era might affect our results. Sun, Lee, and Phan (2018) analyzed the impact of the Global Financial
Crisis on the R&D expenditure of family firms in the United States, pointing out that family firms
tended to increase their investment in R&D compared to non-family firms during the crisis.
Similar to Table 2, Table 3 also indicates that family board representation contributes to theenhancement of R&D intensity, which is consistent with Hypothesis 1. The interaction terms of mainbank ownership and family board representation are significantly positive, which confirms
7

Hypothesis 2. Furthermore, the interaction terms of foreign shareholders and family board
representation are significant and negative, consistent with Hypothesis 3. These results confirm that
our estimated results are stable during the GFC period.
Insert Table 3 about here
5. Discussion
This study analyzes the effects of family control on R&D intensity in publicly listed firms inJapan. First, we found that family board members in Japan are generally not engaged in possible
expropriation, but that they function as stewards of their firms, focusing on enhancing future growth.
Second, we found that main bank ownership reinforces the positive relationship between R&D
intensity and family control. This implies that the monitoring of main banks is effective and that theirclose relationship with their client firms supports decision making concerning the increase of R&D
expenses within family-controlled firms. Third, we discovered that foreign shareholders are in favorof immediate wealth distribution rather than investment in the future growth of family-controlledfirms.
In addition to the above findings, this study also examined the relationship between the R&D
intensity and the growth opportunities of family-controlled firms in Japan. This additional analyses
revealed that foreign shareholders suppress R&D intensity more in family-controlled firms. Thisimplies that foreign shareholders prefer immediate capital gain, especially in firms with higher
growth opportunities.
This study makes several theoretical contributions. First, we investigated the relationshipbetween R&D intensity and family-control in Japan, a stakeholder-oriented corporate governancecountry. Our results imply that instead of the potential expropriation by family members—which
was a possibility—a higher R&D intensity is maintained by the long-term orientation of family
board members. Second, we discovered that foreign shareholders—representing one of theshareholder-oriented scopes—advocate current profit distribution, rather than R&D investment for
future growth opportunities in family-controlled firms.
It is important to note that our study is restricted to publicly-listed firms. There are many small
and medium-sized family-controlled firms in Japan. Therefore, the implications of this study cannot
simply be applied to small and medium sized firms in Japan, because they face different corporate
governance challenges.
6. Conclusions
This study revealed that family control contributes to increased R&D investments in large publicly
traded firms in Japan. The results also imply that family control enhances R&D intensity in family8

controlled firms, consistent with the stewardship theory perspective. Additionally, we found thatbank monitoring also plays a role in enhancing R&D intensity as effective monitors understakeholder orientation corporate governance. Moreover, the results showed that foreign
shareholders would rather decrease R&D intensity in family-controlled firms in favor of short-term
profit, rather than the long-term growth of their firms.
The exploitation presumed by principal-principal conflict perspectives have not beenthoroughly investigated in Japan’s stakeholder oriented corporate governance system. In otherwords, the increase of R&D intensity in family-controlled firms would reflect long-term orientationin Japanese firms. This finding would reflect long-term orientation under collectivism cultural
aspects in Japan which is different from Western countries (Hofsted, 2007). The stewardship theory
perspective is also supported by previous studies done in similar collectivism cultures like Taiwan(Tsai et al., 2006). Lastly, this study contributes to the literature in terms of the important link
between the cultural aspects of a country and its corporate governance mechanisms.

9

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Table 1: Descriptive Statistics

Variable

Mean Std. Dev. 1

1 R&D
1.90
2 Family Dummy
0.30
3 Family Members
0.38
4 Main Bank Ownership 0.95
5 Foreign Ownership 14.13
6 Leverage
49.42
7 ln(Assets)
11.55
8 Growth Sales
0.04
9 Cross Ownership
8.06

2

3

4

5

6

7

8

3.20
0.46 -0.06
0.66 -0.06 0.88
1.63 -0.07 -0.09 -0.08
12.41 0.20 -0.10 -0.10 -0.22
19.81 -0.26 -0.18 -0.16 0.23 -0.16
1.46 0.12 -0.34 -0.29 -0.09 0.52 0.27
0.23 -0.03 0.06 0.04 -0.05 0.07 0.01 -0.02
8.68 -0.02 -0.28 -0.25 0.30 -0.15 0.08 0.06 -0.04

Note: N = 14,991. R&D is the percentage of R&D expenditure of total sales. Family Dummy isequal to 1 when a firm has family directors. Family Members refer to the number of family directors.
Main Bank Ownership is the percentage of shares of total outstanding shares owned by main banks.
Foreign Ownership is the percentage of total outstanding shares owned by foreign investors. We
calculate the Leverage as the ratio of total debt to total assets. We control firm size by using the logof total assets (ln(Assets)). Growth Sales refers to the ratios of the year-on-year change divided bytotal sales. Cross Ownership is the percentage of shares of mutual shareholdings.

15

Table 2: R&D Intensity and Family Control(1)
Family Dummy

(2)

(3)
(4)
Dependent Variable: R&D

0.026 **
(3.96)

Family Members
Main Bank
Ownership (MB)Foreign
Ownership (FO)
Family Dummy*MB
Family Dummy*FO
Family Members*MB
Family Members*FO
Leverageln(Assets)
Growth Sales
Cross
Ownership
Constant
Industry Dummies
Year Dummies
Number of sample
Wald chi2-0.011 **(-6.25)0.002 **
(5.46)(5)

0.032 **
(3.05)
0.028 **
(6.29)-0.011 **(-5.84)0.002 **
(5.94)-0.012 **-0.011 **-0.012 **(-62.66)(-54.62)(-55.79)
0.162 **
0.148 **
0.149 **
(64.22)(50.19)(50.97)-0.065 **-0.059 **-0.060 **(-3.35)(-2.97)(-3.02)-0.008 **-0.007 **-0.007 **(-23.36)(-19.04)(-18.18)-1.008 **-0.964 **-0.969 **(-45.85)(-35.25)(-37.61)
Yes
Yes
Yes
Yes
Yes
Yes
14991
14991
14991
128175.9 ** 647203.8 ** 428426.3 **-0.016 **(-7.19)0.002 **
(5.72)
0.022 **
(5.63)-0.002 **(-3.41)0.031 **
(4.65)-0.013 **(-6.44)0.002 **
(6.01)

0.015 **
(4.79)-0.002 **(-4.30)-0.012 **-0.012 **(-53.64)(-56.99)0.148 **
0.152 **
(48.40)(52.38)-0.047 *-0.020(-2.32)(-0.98)-0.007 **-0.007 **(-19.04)(-18.55)-0.956 **-0.997 **(-34.96)(-39.22)
Yes
Yes
Yes
Yes
14991
14991
443454.5 ** 1862302.0 **+ p < 0.10; * p < 0.05; ** p < 0.01
Note: We use a cross-sectional time-series feasible generalized least squares (FGLS) regression
model to control panel-level heteroscedasticity (Wooldridge, 2002), following Yoshikawa andRasheed (2010). We adopt lagged variables for all of the independent and control variables to avoid
endogeneity problems. Z-statistics are shown in parentheses.

16

Table 3: Additional analysis of R&D intensity and Family Control (GFC)(1)
Family Dummy

(2)

(3)
(4)
Dependent Variable: R&D

0.059 **
(8.74)

Family Members
Main Bank
Ownership (MB)Foreign
Ownership (FO)
Family Dummy*MB
Family Dummy*FO
Family Members*MB
Family Members*FO
Leverageln(Assets)
Growth Sales
Cross
Ownership
Constant
Industry Dummies
Year Dummies
Number of sample
Wald chi2

0.001(0.59)
0.007 **
(19.89)-0.015 **(-54.63)
0.199 **
(52.57)-0.343 **(-11.07)-0.011 **(-26.22)-1.196 **(-37.34)
Yes
Yes
2904
1467452.8 **-0.014 **(-49.40)0.168 **
(47.79)-0.399 **(-12.60)-0.009 **(-21.73)-1.047 **(-33.49)
Yes
Yes
2904
87958.8 **(5)0.064 **
(6.06)
0.057 **
(19.40)0.002(1.19)
0.007 **
(19.02)-0.013 **(-47.82)
0.167 **
(45.49)-0.392 **(-12.12)-0.009 **(-20.68)-1.055 **(-31.56)
Yes
Yes
2904
178822.2 **-0.010 **(-4.75)0.010 **
(24.34)0.055 **
(13.64)-0.005 **(-9.38)0.051 **
(7.07)-0.008 **(-3.85)0.009 **
(18.82)0.029 **
(8.67)-0.003 **(-4.54)-0.015 **-0.014 **(-52.66)(-51.23)0.170 **
0.169 **
(46.62)(45.37)-0.410 **-0.451 **(-13.34)(-14.52)-0.010 **-0.010 **(-21.80)(-22.67)-1.003 **-1.017 **(-29.57)(-29.51)
Yes
Yes
Yes
Yes
2904
2904
289802.0 ** 1739553.0 **+ p < 0.10; * p < 0.05; ** p < 0.01
Note: We use a cross-sectional time-series feasible generalized least squares (FGLS) regression
model to control panel-level heteroscedasticity (Wooldridge, 2002), following Yoshikawa andRasheed (2010). We adopt lagged variables for all of the independent and control variables to avoid
endogeneity problems. Z-statistics are shown in parentheses.

17