Liability of origin imprints: how do the origin imprints influence corporate innovation? Evidence from China

Abstract In transforming emerging economies, many state-owned enterprises (SOEs) underwent privatization, transferring property rights from the state to private entities. This transition not only facilitated the establishment of entrepreneurial family firms but also encouraged the emergence of privatized family firms as property rights were transferred to individuals and families. Consequently, the roots of property rights in these settings can be traced back to either direct establishment or privatization. In this study, we examine how these origin imprints influence corporate innovation. By analyzing a dataset of A-share Chinese listed non-financial family firms spanning from 2005 to 2021, we find that pre-privatization organizational imprints which primarily focus on societal well-being, tend to persist within these privatized family firms, resulting in a lower degree of corporate innovation compared to their entrepreneurial counterparts. Moreover, additional subsample analysis indicates that the adverse impact of privatized family firms on corporate innovation is intensified by strong political connections while mitigated by a well-developed institutional environment in the region. Our results are robust to various econometric methods, alternative explanations, and approaches to address endogeneity concerns such as the two-stage least squares (2SLS), Generalized Method of Moments (GMM), and propensity score matching (PSM) techniques. Overall, this study highlights a source of heterogeneity within the family firms and reveals how organizational imprints inherited from a pre-privatization economic regime can diminish the positive effects usually associated with family ownership.