Effects of industry integration on pharmaceutical firm innovation: institutional investors’ perspective

This study investigates how institutional investors enhance pharmaceutical innovation in China via industry integration (2007–2022). Findings reveal that interconnected firms with institutional ownership exhibit stronger innovation, particularly in patents, driven by channels of agenda control, knowledge transfer, and portfolio risk diversification. Foreign institutional investors significantly boost innovation through global networks and technology transfer. Shared governance structures, including ownership ties and board interlocks, facilitate resource integration and collaborative innovation in regulated markets. The research underscores institutional investors’ dual role as capital providers and innovation catalysts, offering policy insights for leveraging cross-firm governance mechanisms to advance pharmaceutical R&D competitiveness in emerging economies.