This study analyzes the network structures of institutional shareholders and examines the influence of institutional investor cliques on corporate innovation. Our empirical results reveal that institutional investor cliques significantly enhance both innovation input and output. To mitigate endogeneity concerns and establish causality, we adopt multiple empirical strategies. Further evidence suggests that the beneficial impact of institutional investor cliques on firm innovation can be attributed to increased innovation investment efficiency, enhanced employee productivity, reduced information asymmetry, and decreased managerial myopia. Additionally, we find that the positive effect of institutional investor cliques on firm innovation is more pronounced in non-state-owned enterprises and is particularly evident in firms with severe agency conflicts, CEO duality issues, highly competitive product markets, and for firms that have low stock liquidity.

Rising concern over the impact of Chinese industrial policy has led to severe trade tensions between China and some of its major trading partners. In recent years, foreign criticism has increasingly focused on the so-called "Made in China 2025" initiative. In this paper, we use information extracted from Chinese listed firms' financial reports and a difference-in-differences approach to examine how the "Made in China 2025" policy initiative has impacted firms' receipt of subsidies, R&D expenditure, patenting, productivity, and profitability. We find that while more innovation promotion subsidies seem to flow into the listed firms targeted by the policy, we see little statistical evidence of productivity improvement or increases in R&D expenditure, patenting and profitability. This paper suggests that the “Made in China 2025” initiative may have not yet achieved its target goals.