Haste Makes Waste: How Do Patient Institutional Investors Deflate Corporate Digital Innovation Bubbles?

This is the authors' abstract. We don't add key points for this paper.

High-quality digital innovation is increasingly resource-intensive and complex, requiring patient capital that sustains strategic focus, engages in governance, and provides stable funding. Drawing on panel data from Chinese A-share listed firms spanning 2008–2023, this study empirically examines the influence of patient institutional investors on digital innovation bubbles, as well as their mechanisms of action and boundary conditions. Our main finding demonstrates that patient institutional investors play a significant role in deflating corporate digital innovation bubbles. Mechanism analyses indicate that their influence operates through two key channels: mitigating managerial myopia and enhancing credit availability. Further investigations reveal that the bubble-deflating effect is more pronounced in firms with lower rent-seeking intensity, higher board digital leadership, and in regions with higher intellectual property protection level as well as science and technology fiscal expenditure. This research deepens theoretical insights into how institutional investor heterogeneity shapes corporate innovation performance, offers managerial guidance on optimizing innovation resources and enhancing breakthroughs in core digital technologies, and provides important policy implications for strengthening digital innovation policy and refining capital market frameworks.