Common institutional ownership can enhance knowledge spillovers by increasing portfolio firms’ awareness about each other’s innovation. By investigating listed electronic hardware firms in China for 2000-2016, we find that when common ownership by mutual funds is higher between a firm pair, it is more likely that these two firms cite each other’s patents. To confirm causality, we show that even the exogenous increase in firms’ common ownership following their inclusion into the stock index still positively influences the citing likelihood. We also find that such citations are taken place in a timely manner. Additionally, this positive effect is robust when the effects of overlapping board members and common ownership by other types of institutional investors are controlled for. This effect is more pronounced among nonneighboring firms, when non-neighboring firms are close to their common owners, when common owners hold shares longer, and when firms’ executives have lower incentive to communicate (i.e., SOEs). Last, we find that common ownership by mutual funds also enhances knowledge spillovers through third-party patents. This paper deepens the understanding of knowledge spillovers among
firms in developing countries.