I investigate the foreign institutional ownership, which acts as a active monitor, increases the firm’s innovation performance. Using the firms which are listed in Taiwan Stock Exchange from 2014 to 2020, I find the increasing of foreign institutional ownership has significant improvement of firms’ patent numbers and citations. My findings are supported from two mechanisms: the foreign institutional ownership provides (1) the insurance for managers’ innovation failures; and (2) the long-term financial assistance, that is favor for firms’ innovation activities.

TABLE OF CONTENTS
Abstract 3
I. Introduction: 6
II. Institutional background: 10
III. Literature reviews: 11
A. Agency & Monitoring perspective: 12
B. Different Foreign Institutional Characteristics: 13
C. Innovation incentive: 14
IV. Hypothesis: 15
V. Data: 16
VI. Methodology: 18
VII. Summary statistics 20
VII. Baseline result 21
VII. Identification 22
Instrumental Variable Regression 22
Ⅷ. Mechanism 24
A. Insurance 24
B. Financial Assistance 26
Ⅸ. Conclusion 28
Reference 29
Appendix: 32
A. Variable definition: 32




List of Tables
Table 1: Summary Statistics 33
Table 2: Baseline Result 34
Table 3: Instrumental Variable Regression 35
Table 4: Insurance Mechanism 36
Table 5: Financial Assistance Mechanism 37

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