Essays on corporate performance under technological competition

This thesis presents three studies related to the innovation competition. Chapter 1 acts as the outline and introduction for the thesis. Chapter 2 investigates relationship between technological peer pressure (TPP) and corporate sustainability performance. We uncover strong and robust evidence that TPP decreases corporates’ environmental and social performance. Our empirical findings support the view that resource constraints and agency problems serve as channels in establishing this relationship. Additional analyses reveal an industry heterogeneity for this relation, with stronger negative impacts observed in firms with characteristics of high research and development (R&D) intensity, in high-tech industries, non-customer-facing sectors, and “green” industries. In summary, our results highlight the importance of technological competition in the product market in the knowledge-based economy, as well as firms’ sustainability strategies in competitive industries. Chapter 3 explores the relationship between TPP and firms’ mergers and acquisitions (M&As) activities. We provide compelling evidence that TPP serves as a significant motivator for firms to pursue acquisitions. Facing heightened technological pressure from peers, firms exhibit an increased propensity for diversifying acquisitions and targeting innovative companies. Furthermore, our findings demonstrate a positive correlation between acquisitions driven by TPP and improved firm performance, measured by cumulative abnormal returns. Cross-sectional analyses reveal that TPP-driven acquisitions in high-tech industries and single-segment firms lead to superior postmerger performance for the acquirers. Additionally, TPP-induced acquisitions take less time to complete. In conclusion, this research highlights the critical role of technological competition in the product market, particularly within the knowledge-based economy. In Chapter 4, we present convincing evidence that green technological peer pressure positively correlates with stock returns. This relationship holds across different portfolio sorting techniques and is unaffected by common market factors. Additionally, we observe that this positive impact is pronounced during times of heightened public concern about climate change. Specifically, the influence of green technological peer pressure on stock returns is salient only in periods of increased climate change awareness. Overall, our findings deepen the understanding of the important role of green innovation and its valuation in the stock market. Chapter 5 concludes this thesis by highlighting significant remarks, limitations, and avenues for future research.