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Int. J. Accounting, Auditing and Performance Evaluation, Vol. 9, No. 1, 2013

Corporate ownership structure and its impacts on firms innovation level: Tunisian cases Jamel Chouaibi
Faculty of Economic Sciences and Management of Sfax, University of Sfax, Airport Road km 4, 3018, Sfax, Tunisia E-mail: chouaibi_jamel@yahoo.fr
Abstract: This article tests the impact of firms ownership structure on their innovation level. The theoretical framework of this research is based on the major contributions provided by a cognitive approach of corporate governance. Noteworthy, this study analyses empirical data related to a sample consisting of 95 Tunisian manufacturing firms. Empirical evidence has shown that the industrial leaders and ownership concentration are significantly and positively associated with the firms level of innovation. The increasing number of the industrial leaders and their dominance as proprietors has had a significant influence on corporate decisions. The results have also depicted the prevalence of a significantly negative relationship between the firms institutional ownership and innovation policy. Eventually, the findings indicate that institutional investors may not influence management decision making concerning innovation investment. Keywords: cognitive governance; industrial leaders; commitment; innovation; Tunisia. Reference to this paper should be made as follows: Chouaibi, J. (2013) Corporate ownership structure and its impacts on firms innovation level: Tunisian cases, Int. J. Accounting, Auditing and Performance Evaluation, Vol. 9, No. 1, pp.5874. Biographical notes: Jamel Chouaibi received his PhD in Accounting from the University of Sfax, Tunisia, in 2010. At the same time, he teaches accounting at the Faculty of Economic Sciences and Management of Sfax, Tunisia. His main research interests are related to corporate governance, accounting, and new problems of the value as well.

Introduction

Based on a meta-analysis of empirical studies dealing with corporate governance, it has been discovered that the classical model of corporate governance suffers from several limitations (Dalton et al., 1998; Rhoades et al., 2000). The agency theory, for instance, based on a very simplistic assumption, supposes that the shareholders exclusively provide only financial capital and that they assume a financial risk. This governance model demonstrated a low explanatory power with regard to the actual shareholding structures. Actually, it lacks the shareholders cognitive role in order to provide a satisfactorily explanatory model of these structures. Thus, a theoretical framework is required to help
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explain the role of the ownership structure in the innovation development based on corporate governance cognitive theories. In fact, in a context where innovation occupies a central position, the industrial leaders1 may be allowed to participate in the strategy formulation, especially in the preliminary stage of the strategic decision-making. By implementing information, expertise and other cognitive resources, the industrial leader-shareholder also allows the protection of the shareholders interests through identifying the companys operational problem and selecting adequate-decision choices which aim at protecting the shareholders interests (Ginsberg, 1994). However, the participation of corporate governance system in developing the innovative activities could be affected by the leaders motivation to reduce such investments and maximise profits (Garcia-Meca et al., 2005). Moreover, within the framework of delegating some of his power, the leader can use his/her hierarchical authority to deliver inaccurate information which would allow him/her to feel comfortable. Owing to their specificity, the innovation activities require the main shareholders commitment. In this respect, ownership concentration is highly critical to support the learning, and innovation processes, as both these elements require a long-term commitment on behalf of the companys shareholders. Thus, an examination of the main shareholders power, who holds the control, paves the way for examining the extent success of his cognitive contribution in achieving the innovative projects. Actually, the shareholders stability and long-term orientation is likely to facilitate the innovation process development. Nevertheless, this situation could be appeased by an opportunistic behaviour from the part of the companys owners through either imposing their superiority to conceal information or postponing the training programmes (essentially subjective or psychological problems). In this sense, these shareholders could be, somewhat, sensitive to the market evolution or to the technology influence by carefully proceeding to evaluating the innovation activities performance. In addition, during the financing stage, investments in innovation are subject to a careful examination by the institutional investors including the bankers (Hoskisson and Turk, 1990). In this context, the high level of assets makes it too difficult for the bank to assess and evaluate such investments, which implies that the information and knowledge asymmetries will persist between the bank and the project holder. In this respect, bankers are likely to act as mechanisms of filtering and interpreting data according to their own cognitive values. Hence, the institutional shareholder is considered as a contributor of not only financial resources, but also of skills and knowledge (Ocasio and Joseph, 2005). However, the institutional investors short term orientation may reduce the companies commitment to support their innovation strategies. Consequently, investing in the R&D or innovation is likely to be threatened by such investors behaviour. Taking these considerations into account, along with the available critical examination regarding the innovation process, this article aims at answering the following question: What effect does ownership structure have on the firms innovative activities? The major purpose of this study is to investigate the ownership structures impact (industrial shareholder-leaders, ownership concentration and institutional ownership) on the firms innovative activities. Our research area with Tunisia as an example of developing countries being engaged, since 1997, in an important national programme aiming at helping the Tunisian firms face the global competition. This national

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programme has been intended to restructure the Tunisian firms by encouraging them to promote material and non-material investment in order to stimulate innovation leading to competitive advantage. In addition, the establishment of a scientific research system and technological innovation has helped develop the manufacturing sector. Following the promulgation of new legal texts and the creation of structures, consisting of skilled human resources capable of responding to specific requirements of research performance, some positive outcomes are likely to develop. Thus, the average expenditure on the Tunisian research and development in relation to GDP (0.78%) exceeds the average of the European public expenditure to GDP (0.69%). This shows a strong determination by Tunisia to improve its technological position. Finally, this article proposes an original framework whereby it provides convenient answers to the impact of ownership structure on the Tunisian companies innovation level. Thus, this study attempts to provide some explanations and managerial solutions for the Tunisian companies suffering from a lack of innovation. Based on the identification of governance mechanisms that have the greatest impact on technological innovation, this research provide some relevant insights to managers and the different types of shareholder. The decision to consolidate the industrial leaders ownership can help mitigate the problems of under-innovation investment of the Tunisian companies, thus they can reach the ranks of the most competitive firms. The remainder of this paper is organised as follows. The second section contains the presentation of the basic theoretical background and hypotheses development. In this section, we test the relationship between the ownership structure and innovation activities. Section 3 displays the methodology pursued in this study. As for the empirical results, they are exposed and discussed in Section 4. Finally, the fifth section encompasses the concluding remarks and the discussions of our findings and their implications.

Theoretical background and hypotheses development

Within the framework of this study, an evolutionary approach to innovation has been adopted. It considers that the innovation process is complex and uncertain (Thornhill, 2006). Indeed, companies are considered as complex organisations and should be treated as an entity encompassing an amalgamation of diverse varieties. More explicitly, their role is no longer confined merely to supply incentives and resolve agency problems; they are rather considered as institutions and forums of innovation as well as a directory of knowledge and learning promotion (Thornhill, 2006). Hence, under the urgent need for companies to pursue and implement innovative strategies, a more thorough examination of the corporate governance systems appears to be critically essential. Following a contractual approach, the corporate governance mechanisms are merely seen as a prospect of cutting agency and transaction costs. While under the cognitive approach directives, the corporate governance mechanisms are considered as tools which enhance value creation by privileging skills, innovating capacities, and above all, by better exploiting knowledge (Lazonick and OSullivan, 2000). More specifically, as far as this research is concerned, we are interested in the impact of the managers property features, the property concentration and the institutional property necessary for promoting companies innovation activities.

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2.1 The industrial shareholder-leaders: a source of varied information and knowledge

The first hypothesis serves to check whether the industrial leaders participation in the companys capital positively influences the firms innovation level. From a cognitive perspective, the industrial leader-owners represent a wealthy resource since they facilitate mutual understanding between the company and its partners. In fact, they increase the companys capacity to make strategic and risky decisions in concordance with the interests of a great number of stakeholders (Hill and Jones, 1992). They make their strategic skills available by being committed to perform cognitive tasks mostly sought and preferred for decision-making, namely: the environmental analysis as well as the formulation and interpretation of strategies. They also participate in the various stages of the decision-making process by simultaneously applying their specific technical skills and disciplinary powers. The complexity and uncertainty of the strategic decision-making require various combinations of knowledge and information which provide a wide range of opportunities for the leaders participation in strategic decision-making (Thornhill, 2006). Judge and Zeithaml (1992) have noticed that the leaders participation in the strategic decision-making increases owing to the legal responsibility and rising complexity of the commercial transactions in a turbulent environment. In these conditions, the leaders are considered as stronghold of resources privileged for their variable knowledge, whose importance increases, remarkably, in strategic decision-taking. This idea is even more consolidated when the leader-engineer detains an important share in the capital. By virtue of their diverse experience, in particular that pertaining to technical skills, the leaders can raises the database along with the managerial team to a higher status. The additional information which they can contribute may help the other management team reduce the substantial uncertainties. Besides, the various knowledge structures the leaders employ to interpret information enable them to reduce the procedural uncertainty. Therefore, the leaders greatly contribute to improve the shareholders interests by making use of a wide-array of information, expertise and other cognitive resources (Ginsberg, 1994). In companies which enhance a policy of innovation, where an important mass of information is produced and processed, the leaders specialised in management sciences, for instance, are not capable of dealing with such types of technical information. The leaders training skills, origin and background have been widely used as an indicator of his/her values and cognitive preferences, in particular, his/her commitment to implement technological innovation. In this context, Miller (1987) has found a considerable correlation between the strategy of product innovation and the influence of the industrial leaders power (scientific professionals, engineers). Porter (1990) has also specified that the leader experienced in production and engineering is more capable of understanding the operational, technical, and financial implications of investments in innovation. So, companies having engineering leaders-owners tend to concentrate on internal innovation rather than on external acquisitions by making use of their power and, especially, their cognitive skills. This makes us think that the presence of an engineer-leader who has the owners quality is an evident asset in the perfect technological control of the projects in question. Furthermore, the industrial leaders, enjoying a high level of competence skills, are more advantageous in respect of the leaders who exclusively detain managerial training

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background, would have specific information which is likely to allow them to reach the critical resources and efficiently master the uncertainty and risk overwhelming technological innovation. The cognitive skills the leader enjoys will be further consolidated by his participation in the capital. He detains the information and, above all, the knowledge to manage the company which is considered as a forum for innovation. In this sense, the main efforts concern the management of the cognitive costs rather than the transaction or the agency costs. Even in the traditional agency theory, if the leader may find an interest in innovation to improve the benefit of his managerial latitude to the detriment of the lenders, he may also face encounter the problem of a failing project. This justifies the need for a professional leaders detaining cognitive knowledge useful to project development. As a result, the cognitive contribution, which the industrial leader enjoys, exceeds the problem of managerial opportunism described by the agency theory in the specific projects. On the basis of this development, the following hypothesis can be proposed: Hypothesis (H1) The industrial leaders participation in the companys capital positively influences its level of innovation.

2.2 Ownership concentration: a supervisor tool to improve innovation process

The second hypothesis stipulates that ownership concentration positively influences the level of the firms innovation. The previous empirical results dealing with the impact of ownership concentration on innovation are not unanimous. For instance, the work results of Berrone et al. (2005) suggest that the major shareholders impact on the R&D intensity is negative when these shareholders are bankers. However, Lee (2005) noticeably finds a positive effect when the block holders are simultaneously an institutional or physical investor. The volatility of these results can be explained, on the one hand, by the sector-based differences and, on the other hand, by biased samples, which are often minute (Yafeh and Yosha, 2003). Whatever trues the explanations might be, these various results need to be examined in terms of the cognitive theories of corporate governance. This would serve to ensure whether their relevance is valid in innovation-based context as a determinant of a longlasting value creation. This entails us to adopt the new approach of corporate governance. The ownership concentration could also be affected by the integration of cognitive arguments which are an asset necessary to stimulate these investments in terms of innovation. As a matter of fact, the various economists of innovation have shown that the companys success is but the result of an organisational learning by means of which the resources are developed and used (Lazonick, 2000). The efficiency of this learning is due to the long-term commitment on behalf of the shareholders to company (OSullivan, 2000). Consequently, the decision-makers are considered to have control tools over the resources to invest in an innovative process. They keep this commitment until the learning produces conditions to obtain future outputs. For some scholars, the conditions where a corporate governance system sustains innovation and, therefore, have to be respected, are the following ones: the financial commitment, the organisational integration and the control of the resource allocation process (OSullivan, 2000). On the basis of what has already been mentioned, it appears that ownership concentration is a necessary condition to support the process of learning and innovation

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as these two elements require a long-term commitment on behalf of the companys shareholders. Hence, ownership concentration plays an effective role in the pursuit of innovative strategies. Consequently, the examination of the main shareholders powers who possesses the control, paves the way for examining his cognitive contribution in, successively, achieving the innovation projects. In fact, he holds the power and knowledge which simultaneously contribute to the efficiency of innovative strategies. In this respect, the main shareholder who detains control has interest to invest in the riskiest projects which are at the same time, the most profitable. Having knowledge and cognition of the subject matter leads him to privilege such investments. Therefore, the major shareholder plays a double role; first as a contributor of financial resources and second as a contributor of skills and specific knowledge. So, he is considered an industrialist as far as his human resources allow the company to achieve profitable projects for the whole range of partners. He assumes a cognitive role in developing projects involving investments in innovation. Besides, the main shareholders commitment to develop these innovative strategies is a warranty for his cognitive role. Consequently, one can deduce a noticeable and dominant dissociation with the views sustained by the agency theory. According to the latter, and in certain cases, the main shareholder is not driven to make a commitment in these specific and risky projects. He has fears concerning the success of the investment strategies in innovation. Because of this, he is likely to withdraw his commitment for the sake of protecting his own financial capital. On the contrary, if he detains knowledge regarding these projects growth opportunities, he will be in favour of implementing these risky investments. In this sense, the main shareholders decisions, regarding these mental plans, are projects related to innovation. Similarly, the company could benefit from its members in matters of resources, skills, and reduction of uncertainty, to increase the legitimacy and achieve its collective objectives (Lacetera, 2001). It, therefore, turns out that the main shareholder in a specific framework innovation activities development could bring these specific skills by mastering the knowledge and the other cognitive resources relative to these projects. The main shareholders commitment is an asset that facilitates his domination oriented decisions and also ensures the minority shareholders to have confidence on the company. Based on these arguments, we propose that ownership concentration positively influences the companys innovation. Hypothesis (H2) The ownership concentration positively influences the companys innovation level.

2.3 The institutional ownership: a means of transferring knowledge and skills

Most often, the presence of majority institutional shareholders would have an influence on the companys policy, especially on the leaders behaviour. Usually, the institutional shareholders, along with the other major owners, will tend to have a long-term perspective (Aoki, 1990). Consequently, they are inclined to exercise pressure on the leaders to adopt investment strategies in innovation. However, as the institutional investors have short-term interests, they would strive to optimise their short-term investments, in a bid to maximise their profits. To this end, they would do their best to influence the leaders behaviour in such a way as to put a curb on getting involved in any risky strategy (Berger et al., 2005).

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As a result, these investors should be regarded as different groups pursuing different objectives guided or imposed by their intentions and aims, sometimes divergent, in the company. A lot of empirical researches have indicated that the specificity of assets imposes some risk levels on the creditors who tend to refuse to assume or would assume them only at an excessive cost (Bah and Dumontier, 2001). Tylecote and Ramirez (2006) have stressed the importance of the shareholders commitment to stimulate the innovation process in companies. However, the institutional investors strategy greatly differs between investment on the R&D and the innovation. Their presence is likely to have a noticeable and an evident effect on the innovation policy (Rubinstein, 2001). Williamson (1988) has stated that the choice of the appropriate financing method and structure primarily depends on the specificity of the assets. Thus, debt would be convenient for the non-specific assets and the issue of stocks for the specific assets. Eng and Shackell (2001) have found a positive effect of the institutional investors presence on the R&D. Nevertheless, Cherian (2000) results have shown that the institutional investors participation in the capital has a negative effect on the R&D expenses. This can be explained by the argument stipulating that self-financing or issuing shares better fits the specific assets, while debt will be more convenient for financing traditional assets (Shleifer and Vishny, 1997). In this respect, the strategies applied by the control holders differ greatly from a shareholder to another. In our case, however, we are mainly concerned with the examination of the shareholder-possessors control power. The relevance of this measure of ownership structure is to provide us with an assessment tool of the importance of the institutional investors crucial role in management activities concerning innovation. Thus, the company could take advantage of its members, in terms of resources and skills, for the sake of reducing uncertainty, increasing legitimacy, and achieving its collective objectives (Lacetera, 2001). This leads us to assert that the institutional owner, who enjoys the power and technology of investment projects, is crucial for the successful implementation of the innovation process. He is supposed to have the means of knowledge and skill transfer. Such reasoning helps examine the shareholders valuable cognitive contribution. In a context of strong uncertainty regarding innovation, the simplicity of theoretical framework, namely the agency theory, does not help get too close to all the prospective relationships pertaining to the development of innovation projects. In this regard, several empirical studies have examined the presence of institutional investors, such as banks, in a disciplinary perspective while neglecting their roles as contributors of resources and skills. Usually, banks are more or less reluctant to finance investments on the R&D and, consequently, innovation (Damodaram, 1999). In this context, on examining a sample of some US companies, Le et al. (2006) have found that the institutional investors positively and significantly alter the relationship between the R&D expenses and the companys performance. Kor et al. (2005) have pointed out that the institutional property has a non-significant negative moderating effect on the relationship between the R&D expenses and economic performance. Nevertheless, an obviously imperative question can be raised: what makes an institutional investor maintain his/her participation while the company in question is engaged in risky projects of innovation? Actually, this might be justified by his/her possession of knowledge relative to such projects along with the reliance on his/her cognitive skills and mental plans in matter of innovation. Hence, an institutional

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investors contribution in the companys capital stems from his/her development of specific knowledge acquired from his/her senior executives. In this context, the bankers act as mechanisms of data filtration and interpretation by means of their own cognitive values. The shareholder is, therefore, considered as a contributor not only of financial resources but also of skills and knowledge (Charreaux, 2002; Ocasio and Joseph, 2005). In this way, the institutional shareholder assumes that financial and cognitive functions can positively influence the development of innovative activities. His commitment in the support of specific investments undertaken by the company is influenced by the importance of the knowledge he holds concerning these specific projects. Unlike other shareholders lacking such information, the institutional investors are less likely liable to the risks that these projects might engender. As a matter of fact, the most informed investors appear to be the most risk taking ventures. The level of risk aversion is related to the degree of control in investment projects. This underlines accentuates the value of cognitive capital inflow which the shareholder enjoys, necessary for the development of the concerned investment projects. The shareholder is a contributor of financial and cognitive resources required to develop the companys innovative operations. Regarding the Tunisia context, the Business Trading Code brought a new orientation regarding the businesses control and management regulations. This reform has been materialised by a strong implication of the institutional bodies in controlling the Tunisian companies management as well as in having a heavy influence over the companies organisational methods by helping them to profit from their skills in various areas. For this purpose, Shabou (2003) has highlighted that the institutional investor has a striking presence in the Tunisian companys capital with the aim of increasing its value. Accordingly, the following hypothesis seems worth advancing: Hypothesis (H3) The institutional investors participation in the companys capital has a positive effect on the companys innovation level.

The firms size, its affiliation sector and the firms listing on the stock exchange have been included to control the relationship between the ownership structure and innovation. A number of authors have suggested that these variables might influence the firms innovation level (e.g., Wu, 2008).

Research design

3.1 Model and variable measurements

The econometric formulation proposed in this study examines the relationship between the firms ownership structure and its innovation level in accordance with the theoretical and empirical studies discussed above. Our goal is to identify the main factors explaining the observed variation in the Tunisian firms innovation level. In this study, we propose to test the following model:
INVTINDi = 0 + 1 INDSHLEDi + 2 OWNCONCi + 3 INSTIOWN i + 4 LOGTAi + 5 SECTi + 6 LISTi + i

where INVTIND dependent variable

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J. Chouaibi independent variables control variables parameters to estimate the random error 195 firms.
Variable measurement summary Code INVTIND Definition A composite index calculated on the basis of a combination of several items reflecting the companys innovation level: the leaders were asked to determine the owners influence on the implementation of innovative activities A binary variable which takes value 1 if the leader-owner is well trained in engineering or technology and 0 otherwise A binary variable which takes value 1 if the main shareholder detains more than 50% and 0 otherwise Percentage of the capital held by the institutional investors Firms size is measured as the natural log of the total assets A binary variable that takes value 1 if the firm belongs to a high-tech sector and 0 if the firm belongs to a traditional sector A binary variable that takes value 1 if the firm is listed on the Tunis stock exchange and 0 otherwise

INDSHLED, OWNCONC, and INSTIOWN LOGTA, SECT, and LIST

0, 1,,6
i i
Table 1 Variables Innovation index

Table 1 shows the present studys variable measurements.

Property of the industrial leader Property concentration Property of institutional investor Firm size Sector

INDSHLED

OWNCONC INSTIOWN LOGTA SECT

Listed firms

LIST

3.2 Sample and data collection

It is worth recalling that our subject matter highlights the issue of the corporate governance system role in improving the firms financial performance through innovative activities. Noteworthy, the choice of the relevant population to our study has been dominated by the legal jurisdiction under which the involved firms operate. It follows that the first criterion of our population choice exclusively concerns the anonymous firms. Considering the diversity of variables, we have collected our data from several sources. Certain information has been gathered through a survey administered to the companies in question. Additional information about our sample has been manually collected relying on the following sources of information: companies financial statements published in the official bulletins of the Tunis Stock Exchange companies annual reports available at the financial market council.

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Our sample contains a total number of 95 Tunisian industrial firms, among which 17 are listed on the Tunis Stock Exchange while 78 are not. The concerned firms have been interviewed over a three year period ranging from 2004 to 2006. The choice of this period is based on the recommendations of the Oslo manual of the OECD (1997) as well as the empirical studies on the subject available in different contexts (Flor and Oltra, 2004; Wu, 2008). In this study, we are exclusively interested in the manufacturing firms. Table 2 highlights the sample companies and their sectoral affiliations.
Table 2 Sector Agro-alimentary Chemicals Mechanics and metals Textiles and clothing Electrical and electronic material equipment Construction materials, pottery ceramics and glass industry Information technology and communication Total number of firms Distribution of firms in the overall sample Number of firms 30 8 10 12 15 9 11 95

Empirical results and discussion

It is worth noting that the Statistical Package for Social Sciences (SPSS) software (version 11.0) under Windows has been used to analyse the collected data. Multiple-linear regressions have been applied to determine the important predictors. The relationship between ownership structure and firms innovation level has been tested by using multiple linear regression models. Table 3 presents the correlation coefficients between the various explanatory variables used in this model. As can be noticed, the results presented in this table show that no coefficient exceeds the threshold of 0.7 as the limit set by Kervin (1992).
Table 3 Variables INDSHLED CONCOWN INSTIOWN LOGTA SECT LIST Correlation coefficients INDSHLED 1 0.035 0.029 0.100 0.097 0.004 1 0.073 0.162 0.122 0.122 1 0.0.022 0.182 0.257 0.051 1 1 0.017 1 CONCOWN INSTIOWN LOGTA SECT LIST

The intercorrelations for all the explanatory variables have been examined by applying the variance inflation factors (VIF). The VIF analysis reveals no sign of multicollinearity, and the VIF values corresponding to all the independent variables range from 1.017 to 1.094; far below the acceptable upper bound of 10. The VIF has been reported, for each regression, to demonstrate the model stability.

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In fact, both tests suggest that the regression estimates are not degraded by the presence of multicollinearity. Furthermore, they consistently yield a Durbin-Watson statistics. This statistics is equal to 0.798, which indicates that the autocorrelation constitutes no problem. The empirical results demonstrate that 24 % of the variation in the innovation level is explained by variables related to the ownership structure and to the control variables. As for the statistics of Fisher (F), which are equal to (4.875), they confirm the good quality of the model at a significant threshold level lower than 1%. Hence, the model explanatory power seems to be satisfactory since Fishers statistics (F) appears to be significant at the threshold of 1 %. Consequently, we tend to reject the null hypothesis and turn to stipulate that regression is generally significant. It can be concluded that the model is statistically significant and explanatory for the studied phenomenon. As for the significance of the independent variables, it can be stated that all the variables are statistically significant. As far as the significance of the independent variables is concerned, we can deduce that all the variables are statistically significant. Concerning the control variables introduced into the model, the results show that they have not been statistically significant. Table 4 depicts beta coefficients, t Student and significance along with a VIF of the model.
Table 4 Variables C INDSHLED CONCOWN INSTIOWN LOGTA SECT LIST Model statistics Results of the multiple linear regressions model Coefficients b 1.129 0.0945 0.215 0.113 0.067 0.0244 0.0407 F = 4.875 (p = 0.000) R2 = 0.249, R2 adj = 0.198 D-W = 0.798 Notes: *Indicates statistical significance at 10% level, respectively. **Indicates statistical significance at 5% level, respectively. ***Indicates statistical significance at 1% level, respectively. (n.s): no significance t-student 4.194 4.510 2.974 1.834 0.022 0.331 0.471 Significance 0.000** 0.000*** 0.004*** 0.070* 0. 819(n.s) 0.741 (n.s) 0.639 (n.s) 1.017 1.056 1.094 1.036 1.077 1.044 VIF

4.1 Evidence of the industrial owner-manager impact on the firms innovation level
The first hypothesis (H1) predicts that the industrial leader has a positive relationship with the firms innovation level. An examination of the statistical tests shows that this variable has had a positive and significant impact on the variation level of innovation. The regression model shows that there is a significant relationship between the industrial leaders (INDSHLED) and innovation (INVTIND) is positively significant (t = 4.510, p = 0.000). Hence, hypothesis (H1) has been accepted and validated.

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These results show that the increasing contribution of the industrial leaders to the companys capital has a positive and significant impact on promoting innovation. This result highlights the leaders cognitive contribution to the development of innovation projects. Consequently, in a context of risk and uncertainty pertaining to innovative investment projects, decision-makers are brought to have certain tools of power on the resources for the purpose of investing them on a certain innovative process. This reminds us of the conditions required by a corporate governance system in a bid to support innovation by relying, among other things, on organisational learning (Lazonick and OSullivan, 2000). Yet, in companies pursuing an innovative policy, where an important mass of information and knowledge has been produced and analysed, the professional leaders are found in a position in which they are not capable of dealing with this massive volume of information concerning the innovation investment projects. Moreover, these projects specificity makes of knowledge possession an asset for the major purpose of improving the decisions quality (Haleblian and Rajagopalan, 2006). In this case, the leader, who simultaneously assumes both targeted roles; as an owner and as an industrialist, helps increase the perspectives of growth by detaining information and knowledge; elements on which the innovation strategies are based (Fosfuri and Trib, 2008). It turns out that the medium-term or long-term industrial logic is set against the short-term financial logic for the industrial leaders. The opposition between the industrial logic and the financial logic is explained by the fact that the development of innovation projects relies simultaneously on the how to do know how as well as on the state of being a decision-maker. Besides, the previous results give evidence that the difference and divergence of interests and the asymmetry of information represent obstacles which slow down or even impede the innovation projects success (Cherif, 1999; Rubinstein, 2001). Moreover, the rigidity of the corporate governance system could prevent the leaders from launching unsafe investments projects in terms of innovation. The problems of moral risk and adverse selection are obviously imperative, too. Nevertheless, the results achieved by this study, and which are based on the shareholders cognitive contribution, show that the previously-mentioned risks do not represent such constraints as to impede the company in innovating. Hence, the leader, who contributes in the capital, is mainly the one who is well formed and trained either in engineering or in technology, he is not an instigative factor bound to improve the companys innovative capacity in the Tunisian context.

4.2 Evidence of the ownership concentration impact on the firms innovation level
The second hypothesis (H2) predicts a positive relationship between the ownership concentration and the firms innovation level. In the model, the relationship between the ownership concentration CONCOWN and innovation INVTIND is positively significant (t = 2.974, p = 0.004). Therefore, Hypothesis 2 is confirmed. In this framework, companies which need to pursue innovation strategies have to involve the knowledge holders in the decision-making process (Fosfuri and Trib, 2008). In this respect, the concentration of ownership is positively interpreted as a favourable advantage or factor, as the main shareholder is himself the one who has the perfect knowledge of such projects, depending on his cognitive and mental plans together with the control legitimacy that he enjoys. Besides, our results perfectly comply with the

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conclusions of the cognitive waves of corporate governance. Hence, in some cases, and by relying on the postulates of the agency theory, the main shareholder is not stimulated to make any commitment in certain specific and risky projects such as the development of innovation projects (Jensen, 2004). As a result, he turns to withdraw his commitment for the sake of protecting his proper financial capital. On the contrary, if he detains knowledge about the growth opportunities pertaining to these projects, he will certainly be in favour of applying such investments. In this respect, the main shareholders decisions are related to these mental plans concerning the innovation projects. Hence, our empirical results confirm our assumption denoting that the shareholders cognitive contribution is strengthened by the control margin he enjoys. Nevertheless, in such a specific context, as the development of innovation projects, the possession and mastering of the financial and cognitive capital is an asset to stimulate these activities. As a result, the concentration of ownership, particularly in cases when the appropriate shareholders maintain their participation for a long period, highly stimulates long-term investments in innovation. The concentration of ownership can, therefore, be regarded as a form of financial commitment and financial integration necessary for most innovative companies (Tylecote and Ramirez, 2006). Still, adopting a wider perspective, outlooking the corporate governance system as being a question of agency and conflict, the presence of a stable major shareholder could be a positive sign for companies pursuing long-term innovative strategies. For instance, Hansen and Hill (1991) assert that firms with concentrated shareholding tend to adopt investments on a quite long temporal horizon. On the contrary, in firms with scattered shareholding, an important decline of stock market prices could drive the minority shareholders to give up their securities and, consequently, expose the firm to attempts of takeovers. This confirms the fact that the controlling block holders are less concerned about the fluctuation in the short-term results and more directed to the investments on long temporal horizon maximising their longterm wealth. Besides, having major controlling block holders helps the company benefit from his knowledge in strategic investments so as to correctly estimate the leaders behaviour. However, in companies with no major owners, the leaders tend to maximise the short-term profits, thus, sacrificing the long-term objectives concerning the development innovation investments. Besides, the main shareholders behaviour is justified by the superiority of the information and knowledge he enjoys in the domain of investments pertaining to the activities of innovation. Nevertheless, in firms with scattered shareholding, an important decline in stock market prices could drive the minority shareholders to give up their securities and to, consequently, expose the firm to attempts of takeovers. The leaders, for fear of losing their jobs, are bound to oppose these takeovers by targeting their decisions to short-term investments liable to generate fast cash flow in an attempt to appease the fall in prices, and, consequently, reduce investments in innovation.

4.3 Evidence of the institutional ownership impact on the firms innovation level
The statistical tests show that the relationship between the institutional ownership and the firms innovation level is negatively significant (beta = 0.113, t = 1.834, p = 0.070). So, the third hypothesis (H3) has not been confirmed. These results confirm the previous results discovered by Damodaran (1999) suggesting that the banks reluctance to finance investments in the R&D and, consequently, in innovation. In addition, the results reached

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by Cherian (2000) have shown that the institutional investors have had a negative effect on the R&D expenses. The results reached throughout the hypotheses (H1 and H2) have demonstrated that the development of innovation related projects is essentially achieved via the owners commitment. Yet, according to the third hypothesis result, the institutional shareholders contribution has had a negative and significant impact on the innovation level. This shows that the acquired knowledge and detention of specific information pertinent to the development of the innovation projects are critically the most decisive elements in explaining and highlighting the shareholders commitment. This also explains the passive behaviour of the institutional investors promoting such projects. In this way, the institutional investors participation in the capital does have a negative outcome on the development of innovation activities led by the Tunisian companies. It is actually the major explanation that could be drawn on the basis of these results regarding the lack of information these investors have demonstrated relating to the investment innovation projects. Furthermore, these results stress the fact that detaining the financial resources is by itself not enough to carry out the investment projects as the latter require a deep and thorough understanding of the nature and the technology of such projects.

Summary and concluding remarks

In this article we have examined the impact of ownership structure on innovation activities. Based on a cognitive approach of corporate governance, we argue that the ownership structure has had an impact on the corporate innovation activities relevant to the Tunisian manufacturing firms. Specifically, the results have shown that the relationship between innovation activities and both variables (the industrial leaders and ownership concentration) is significantly positive. This result highlights the importance of the shareholders cognitive contribution in the innovation development. Eventually, the statistical tests have shown that the control variables (size of firm, sector and quotation) have had no remarkable impact on the companys level of innovation. This article proposes a first set of answers to the impact of ownership structure on the development of the Tunisian companies innovation level. Thus, this study has attempted to provide explanations and managerial solutions for the Tunisian companies suffering from a lack of innovation. In other words, based on the identification of governance mechanisms that have the greatest impact on innovation, this research provides an insight to managers and the different types of shareholders. The decisions to consolidate the ownership of industry leaders can help mitigate the problems of under innovation investment of the Tunisian companies, for them to reach the ranks of the most competitive firms. These contributions, both theoretical and practical, remain subject to two major constraints associated with the restrictions imposed by the implementation of such work. The first limit maintains the composition of a suitable sample and its relatively-reduced size. More explicitly, the generalisation of the results depicted in this study is not possible. As for the second limit, it pertains to the functional variables measuring the cognitive shareholders contribution. Still, these limits should not conceal the numerous original results achieved by this study relevant to the Tunisian context. In the first place, we intend to articulate our quantitative study by a further qualitative one. Indeed, to better understand the behaviour and influence of the concerned actors on the level of

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innovation, we intend to conduct a future study based on live speeches, interviews, and verbal conservations conducted with the company decision-makers.

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Notes
1 This article proposes another model, based on the cognitive role directing and contribution of competences that the shareholders often keep. It is possible to consider this model as a component of a corporate governance theory extended to cognitive variables.