CORPORATE GOVERNANCE: There are several models explaining corporate governance:

(i) European model is a two-tiers system to prevent abuse. The two-tiers consists of the Supervisory Board and the Board of Director. The Supervisory Board oversees the Board of Directors and the Board of Directors oversees the day-to-day operation of the company.

(ii) Anglo-American Model is a straight forward profit maximizer objective model. The governance rest in the hands of the Board of Director. There is no supervisory board like that found in European firms. For this reason, American corporate board members are prone to criticism of abuses, i.e. overpaid, etc. See: https://www.youtube.com/watch?v=PF_iorX_MAw

(iii) India Model defines the Board of Directors as the trustee who works for the benefits of the shareholders (true owner). Under the term "trustee" this model ties corporate governance to both civil and criminal liabilities for breach of trust.

MIXED RESULTS: Perhaps the mixed results could be explained by the fact that are several, not one, model for corporate governance. It would be interesting if a meta study could be conducted so that the three groups could be compared in a large panel.

INNOVATION: in general, no matter what model one follows, corporate governance should be conducive to innovation, i.e. positive relationship. Innovation may be guided by policy in that the corporate officers paves the way to innovation and new ideas. This policy statement comes in a form of general and over all corporate strategy---as a strategic guidance, it is mostly stated in a general form. The innovation itself, however, is generally affected (the actual doing and making innovation) occurs at operational level with the responsiveness or support of mid-level management to ensure that innovative work could be carried out. The challenge of the research is to link these two levels to verify the claim of causality. if the organization is complex and vexed with over-grown bureaucracy, the social distance between the strategic and operational levels within the organization remains disconnected. Under such circumstance, the link between corporate governance and innovation may be weak.

https://www.youtube.com/watch?v=PF_iorX_MAw

First, what about R&D are you interested in? How much you invest or how successful your investment is? I think both of these issues are interesting if you develop the underlying reasons for how alignment/entrenchment is expected to affect these outcomes.

If the corporate governance laws effectively align the interest of managers and shareholders, then firm innovation should increase. Unfortunately, it seems managers are utility maximizer while shareholders are wealth maximizer. This conflict of interest always exists, as part of the principal-agent problem. This differences in goals (managers' goal versus shareholders' goal) will influence the level of innovation firms undertake.

CORPORATE GOVERNANCE: There are several models explaining corporate governance:

(i) European model is a two-tiers system to prevent abuse. The two-tiers consists of the Supervisory Board and the Board of Director. The Supervisory Board oversees the Board of Directors and the Board of Directors oversees the day-to-day operation of the company.

(ii) Anglo-American Model is a straight forward profit maximizer objective model. The governance rest in the hands of the Board of Director. There is no supervisory board like that found in European firms. For this reason, American corporate board members are prone to criticism of abuses, i.e. overpaid, etc. See: https://www.youtube.com/watch?v=PF_iorX_MAw

(iii) India Model defines the Board of Directors as the trustee who works for the benefits of the shareholders (true owner). Under the term "trustee" this model ties corporate governance to both civil and criminal liabilities for breach of trust.

MIXED RESULTS: Perhaps the mixed results could be explained by the fact that are several, not one, model for corporate governance. It would be interesting if a meta study could be conducted so that the three groups could be compared in a large panel.

INNOVATION: in general, no matter what model one follows, corporate governance should be conducive to innovation, i.e. positive relationship. Innovation may be guided by policy in that the corporate officers paves the way to innovation and new ideas. This policy statement comes in a form of general and over all corporate strategy---as a strategic guidance, it is mostly stated in a general form. The innovation itself, however, is generally affected (the actual doing and making innovation) occurs at operational level with the responsiveness or support of mid-level management to ensure that innovative work could be carried out. The challenge of the research is to link these two levels to verify the claim of causality. if the organization is complex and vexed with over-grown bureaucracy, the social distance between the strategic and operational levels within the organization remains disconnected. Under such circumstance, the link between corporate governance and innovation may be weak.

https://www.youtube.com/watch?v=PF_iorX_MAw

Thanks for your helpful comments.

Dear Prof Lobo, I am interested in both aspects (what is spent on R&D and how successful has the project in R&D), and scenarios related to over- or under-investment.

Hi Fabrizio,

You may be intereste'd by this paper:

Independent boards and innovation

Journal of Financial economics, March 2017, vol 123, Pages 536-557

Benjamin Balsmeier, Lee Fleming, Gustavo Manso

Best regards