A recipe for technological innovation: Does hedge fund activism matter A fuzzy set qualitative comparative analysis?

Abstract

Hedge fund activism and firm characteristics can be combined to explain targets' engagements in innovative activities. The “difference in difference” regression framework is first performed and shows that target firms experience an improvement in innovation efficiency due to the presence of hedge funds (HFs) activists. The fuzzy set Qualitative Comparative Analysis (fsQCA) perspective, is used, on the HF activism‐technological innovation relationship, which recognizes the existence of conjunctural causation. The main sets from fsQCA leading to high/presence innovation input/output display the presence of activist HFs combined to target mature firms, low leveraged ones, firms performing structural changes, and/or those that better refocus on their core innovation expertise and technologies in these areas.