Do Mandatory Pension Contributions Hinder Innovation?
Stuart School of Business research presentation by: Associate Professor of Finance Haizhi Wang and Hao Shen, Stuart Ph.D. student
Do Mandatory Pension Contributions Hinder Innovation?
- Associate Professor of Finance Haizhi Wang
- Hao Shen, Stuart Ph.D. student
Abstract:
This paper examines the effect of mandatory pension contributions on innovation by using a sample of firms sponsoring defined benefit pensions. We find that patents and patents citations decline for firms making mandatory pension contributions. The result is more pronounced form firms that are financially constrained, for firms that have more institutional investors and short-horizon investors, and for firms that use less long-term incentives. To mitigate the decline in innovation, firms are more likely to enter into R&D agreement, technology transfer, and joint venture. We suggest that mandatory pension contributions hinder innovation by reducing R&D expenses.
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