Founder control and breakthrough innovation: Evidence from high-tech firms in China

Zi Qi Zhang; Bao Jun Tang; Zhi Su; Yongji Zhang

doi:10.1016/j.chieco.2025.102572

Founder control and breakthrough innovation: Evidence from high-tech firms in China

Zi Qi Zhang
, Bao Jun Tang
, Zhi Su
, Yongji Zhang^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

We examine the effect of founder control on breakthrough innovation among Chinese high-tech firms from 2008 to 2022. We measure founder control by the equity held by founders actively involved in governance and identify breakthrough innovation with Sentence-BERT (SBERT) embeddings of patent texts. We find a strong positive association between founder control and future breakthrough innovation. Using unexpected founder departures as an instrument, our identification strategy establishes a robust causal relationship. The underlying mechanisms include talent investment, internal discipline, strategic reorientation, and technological resilience. The effect is heterogeneous across founding team's size, internal structure, attributes, and tenure. Our results support a structural view of founder governance where concentrated control serves as an engine for corporate innovation.

Original language	English
Article number	102572
Journal	China Economic Review
Volume	94
DOIs	https://doi.org/10.1016/j.chieco.2025.102572
Publication status	Published - Dec 2025
Externally published	Yes

Keywords

BERT
Breakthrough innovation
China
Corporate governance
Founder control

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10.1016/j.chieco.2025.102572

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title = "Founder control and breakthrough innovation: Evidence from high-tech firms in China",

abstract = "We examine the effect of founder control on breakthrough innovation among Chinese high-tech firms from 2008 to 2022. We measure founder control by the equity held by founders actively involved in governance and identify breakthrough innovation with Sentence-BERT (SBERT) embeddings of patent texts. We find a strong positive association between founder control and future breakthrough innovation. Using unexpected founder departures as an instrument, our identification strategy establishes a robust causal relationship. The underlying mechanisms include talent investment, internal discipline, strategic reorientation, and technological resilience. The effect is heterogeneous across founding team's size, internal structure, attributes, and tenure. Our results support a structural view of founder governance where concentrated control serves as an engine for corporate innovation.",

keywords = "BERT, Breakthrough innovation, China, Corporate governance, Founder control",

author = "Zhang, \{Zi Qi\} and Tang, \{Bao Jun\} and Zhi Su and Yongji Zhang",

note = "Publisher Copyright: {\textcopyright} 2025 Elsevier Inc.",

year = "2025",

month = dec,

doi = "10.1016/j.chieco.2025.102572",

language = "English",

volume = "94",

journal = "China Economic Review",

issn = "1043-951X",

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TY - JOUR

T1 - Founder control and breakthrough innovation

T2 - Evidence from high-tech firms in China

AU - Zhang, Zi Qi

AU - Tang, Bao Jun

AU - Su, Zhi

AU - Zhang, Yongji

PY - 2025/12

Y1 - 2025/12

N2 - We examine the effect of founder control on breakthrough innovation among Chinese high-tech firms from 2008 to 2022. We measure founder control by the equity held by founders actively involved in governance and identify breakthrough innovation with Sentence-BERT (SBERT) embeddings of patent texts. We find a strong positive association between founder control and future breakthrough innovation. Using unexpected founder departures as an instrument, our identification strategy establishes a robust causal relationship. The underlying mechanisms include talent investment, internal discipline, strategic reorientation, and technological resilience. The effect is heterogeneous across founding team's size, internal structure, attributes, and tenure. Our results support a structural view of founder governance where concentrated control serves as an engine for corporate innovation.

AB - We examine the effect of founder control on breakthrough innovation among Chinese high-tech firms from 2008 to 2022. We measure founder control by the equity held by founders actively involved in governance and identify breakthrough innovation with Sentence-BERT (SBERT) embeddings of patent texts. We find a strong positive association between founder control and future breakthrough innovation. Using unexpected founder departures as an instrument, our identification strategy establishes a robust causal relationship. The underlying mechanisms include talent investment, internal discipline, strategic reorientation, and technological resilience. The effect is heterogeneous across founding team's size, internal structure, attributes, and tenure. Our results support a structural view of founder governance where concentrated control serves as an engine for corporate innovation.

KW - BERT

KW - Breakthrough innovation

KW - China

KW - Corporate governance

KW - Founder control

UR - https://www.scopus.com/pages/publications/105022172395

U2 - 10.1016/j.chieco.2025.102572

DO - 10.1016/j.chieco.2025.102572

M3 - Article

AN - SCOPUS:105022172395

SN - 1043-951X

VL - 94

JO - China Economic Review

JF - China Economic Review

M1 - 102572

ER -

Founder control and breakthrough innovation: Evidence from high-tech firms in China

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Keywords

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