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The Value of Business–Government Ties for Manufacturing Firms’ Product Innovation during Institutional Transition in China

Chun Yang (), Bart Bossink () and Peter Peverelli ()
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Chun Yang: Faculty of Sciences, Section of Science, Business & Innovation, Vrije Universiteit Amsterdam, 1081 HV Amsterdam, The Netherlands
Bart Bossink: Faculty of Sciences, Section of Science, Business & Innovation, Vrije Universiteit Amsterdam, 1081 HV Amsterdam, The Netherlands
Peter Peverelli: Amsterdam Business Research Institute, Vrije Universiteit Amsterdam, 1081 HV Amsterdam, The Netherlands

Sustainability, 2018, vol. 11, issue 1, 1-27

Abstract: This study investigates how firms invest in building and maintaining business–government (B–G) ties when they aim to innovate in regions where, due to institutional transitions, institutional contexts differ remarkably. Using data from the China Enterprise Survey of the World Bank, empirical findings suggest that the influence of B–G ties on Chinese firms’ product innovation is different in distinctive institutional contexts in China. More specifically, during institutional transition, B–G ties become less efficient for facilitating product innovation when regional legal institutions and infrastructural supporting systems in a region are more stable, fair, and efficient. By contrast, during institutional transition, a positive effect of B–G ties on firm product innovation in a region becomes more significant when financial systems are relatively advanced. In addition to this, the value of B–G ties for firm product innovation appears to be more stable when business regulation develops within subnational regions.

Keywords: business–government ties; institutional transition; institution-based view of business strategy; manufacturing firms’ product innovation; China (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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