Under what institutional conditions do business groups enhance innovation performance?

Abstract

This study examines the institutional mechanisms through which business groups impact innovation in emerging markets. Rather than merely viewing groups as the result of a weak institutional environment, this study proposes that there are complementary elements between groups and institutions, enabling groups to benefit from interactions with their institutional environment. Evidence from a large sample of Chinese firms indicates that the effects of groups on innovation are pronounced when the group is affiliated to a higher level government agency and when the level of region-specific marketization is higher. The findings point to the context-dependent nature of the innovation and the existence of both substitution and complementary effects between business groups and institutions.

Internationalization and innovation performance of emerging market enterprises: The role of host-country institutional development

“…The results suggest that well-developed institutions compensate for disadvantages of liability of foreignness (Hymer, 1976) and in fact enable foreign firms to get access to knowledge and resources which enhance their innovation performance back home. Adding to the emerging institution-based explanations of the rise of EMEs as innovators (e.g., Wang et al, 2015) that largely focus on the role of home-country institutions, we posit that the institutional and knowledge gap between the host market and the home market becomes conducive to reverse learning and knowledge opportunities for internationalized EMEs (Bertrand & Capron, 2014). Combined with the finding that a strategy of international expansion in geographical diverse and institutionally well-developed countries increases a firm's innovation performance our results, therefore, support the comparative institutional perspective that firms venture overseas in order to arbitrage institutional differences between home-and host-countries and enhance their performance (e.g., Luo et al 2010).…”

“…First, prior research suggests that well-developed host-country institutions can help EMEs nurture innovation by providing factor inputs and innovation intermediaries and by reducing transaction costs (e.g., Wang, Yi, Kafouros & Yan, 2015). On the other hand, many EMEs are not used to operate in such environments, and therefore, may be less able to exploit the associated benefits and may have to implement costly and disruptive organizational changes.…”

Subnational institutions and open innovation: evidence from China

“…The former covers financial markets, labour market and technology markets, while the latter includes market intermediaries (e.g., legal services, accounting services and industry associations) and innovation intermediaries. The NERI index provided a score for both variables for each of China's provinces, municipalities and autonomous regions and is widely used by scholars (e.g., Hong et al, 2015;Wang et al, 2015). A greater score indicates better market development.…”

“…However, these studies often assume that the institutional context remains the same across different subnational regions within a given country and, as a result, the role of subnational institutions in shaping the performance outcomes of OI is under-theorized. This neglect is surprising because institutions are heterogeneous across subnational regions within a country (North, 1990;Wang et al, 2015) This study aims to address these research gaps by developing and testing a context-dependent perspective of OI using a sample of high-tech Chinese manufacturing firms. Building on previous advances (e.g., Hong et al, 2015;Wang et al, 2015), we join the literatures on OI and institution-based view in trying to consider the participatory and endogenous role of subnational institutions in shaping the outcomes of OI.…”

“…This neglect is surprising because institutions are heterogeneous across subnational regions within a country (North, 1990;Wang et al, 2015) This study aims to address these research gaps by developing and testing a context-dependent perspective of OI using a sample of high-tech Chinese manufacturing firms. Building on previous advances (e.g., Hong et al, 2015;Wang et al, 2015), we join the literatures on OI and institution-based view in trying to consider the participatory and endogenous role of subnational institutions in shaping the outcomes of OI. We posit that there are significant variations in institutions across subnational regions within a given emerging country such as China that create both opportunities and challenges for EMEs' innovative activities which in turn depict the boundary conditions with respect to when OI strategy enhances innovation performance.…”