A Plausible Way to Induce Interfirm Knowledge Spillovers Based on Informal Networks: Evidence from Analysts

ABSTRACT

By documenting information flows from analysts to covered firms, this paper provides robust evidence that firms connected by informal networks of shared analysts exhibit greater knowledge spillovers, and are largely influenced by firms’ absorptive capacity. In cross-sectional tests, we demonstrate that the spillover is greater for analysts with higher industry specialization and forecast activity intensity. In addition, the effect varies with firm pairs’ industry homogeneity and geographic proximity. Finally, by focusing on the real effect of shared analysts on corporate innovation, we find that shared analysts can facilitate the covered firms’ upward convergence in R&D expenditure. Collectively, this paper provides emerging capital market evidence for the function of informal networks based on shared analysts regarding firms’ innovation decisions through knowledge spillovers.

KEYWORDS:

• Shared analyst
• patent citation
• interfirm knowledge spillover
• informal network

JEL:

• G24
• G30
• O31
• O32

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. https://www.cnipa.gov.cn/art/2010/11/18/art_65_11353.html.

2. For example, if firm i is cited by both firm m and firm n, and at the same time, firm n is cited by firm i, then three firm-pair observations are generated, i.e., firm pair m-i, firm pair n-i and firm pair i-n, respectively.

3. Patent-intensive industries including Information and Communication Technology Manufacturing (C39); Information and Communication Technology Service Industry (I63, I64, and I65); New Equipment Manufacturing (C34, C35, C36, C37, C38, and C40); New Material Manufacturing (C26, C28); Medicine and Medical Industry (C27, C35); Environmental Protection Industry (C35, D44, D45, D46); R&D, Design and technical services (M73, M74, M75).

Additional information

Funding

This work is supported by the Humanities and Social Science Fund of the Ministry of Education of the People’s Republic of China, Grant/Award number: [21YJA630107]; Ministry of Education of Humanities and Social Science Project.