IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2018i1p63-d192654.html
   My bibliography  Save this article

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

Author

Listed:
  • Chun Yang

    (Faculty of Sciences, Section of Science, Business & Innovation, Vrije Universiteit Amsterdam, 1081 HV Amsterdam, The Netherlands
    Department of Public Administration, Hunan University, No. 2 Lushan Rd., Changsha 410082, China)

  • 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)

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.

Suggested Citation

  • Chun Yang & Bart Bossink & Peter Peverelli, 2018. "The Value of Business–Government Ties for Manufacturing Firms’ Product Innovation during Institutional Transition in China," Sustainability, MDPI, vol. 11(1), pages 1-27, December.
    • Handle: RePEc:gam:jsusta:v:11:y:2018:i:1:p:63-:d:192654
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/1/63/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/1/63/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Runhui Lin & Ya Li & Tao Peng & Hongjuan Zhang, 2017. "Venture capital reputation and portfolio firm performance in an emerging economy: The moderating effect of institutions," Asia Pacific Journal of Management, Springer, vol. 34(3), pages 699-723, September.
    2. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    3. Robert E. Hoskisson & Mike Wright & Igor Filatotchev & Mike W. Peng, 2013. "Emerging Multinationals from Mid-Range Economies: The Influence of Institutions and Factor Markets," Journal of Management Studies, Wiley Blackwell, vol. 50(7), pages 1295-1321, November.
    4. Jing Zhang & Justin Tan & Poh Wong, 2015. "When does investment in political ties improve firm performance? The contingent effect of innovation activities," Asia Pacific Journal of Management, Springer, vol. 32(2), pages 363-387, June.
    5. Kunäœiäœ, Aljaå½, 2014. "Institutional quality dataset," Journal of Institutional Economics, Cambridge University Press, vol. 10(1), pages 135-161, March.
    6. Haiyang Li & Yan Zhang, 2007. "The role of managers' political networking and functional experience in new venture performance: Evidence from China's transition economy," Strategic Management Journal, Wiley Blackwell, vol. 28(8), pages 791-804, August.
    7. Tomasz Lenartowicz & Kendall Roth, 2001. "Does Subculture Within a Country Matter? A Cross-Cultural Study of Motivational Domains and Business Performance in Brazil," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(2), pages 305-325, June.
    8. Ahlstrom, David & Bruton, Garry D. & Yeh, Kuang S., 2008. "Private firms in China: Building legitimacy in an emerging economy," Journal of World Business, Elsevier, vol. 43(4), pages 385-399, October.
    9. William Bygrave & Michael Hay & Emily Ng & Paul Reynolds, 2003. "Executive forum: A study of informal investing in 29 nations composing the Global Entrepreneurship Monitor," Venture Capital, Taylor & Francis Journals, vol. 5(2), pages 101-116, April.
    10. Eitan Goldman & Jörg Rocholl & Jongil So, 2013. "Politically Connected Boards of Directors and The Allocation of Procurement Contracts," Review of Finance, European Finance Association, vol. 17(5), pages 1617-1648.
    11. Friederike Welter & Teemu Kautonen & Alexander Chepurenko & Elena Malieva & Urve Venesaar, 2004. "Trust Environments And Entrepreneurial Behavior – Exploratory Evidence From Estonia, Germany And Russia," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 327-349.
    12. Wu, Jie, 2011. "Asymmetric roles of business ties and political ties in product innovation," Journal of Business Research, Elsevier, vol. 64(11), pages 1151-1156.
    13. Méon, Pierre-Guillaume & Weill, Laurent, 2010. "Is Corruption an Efficient Grease?," World Development, Elsevier, vol. 38(3), pages 244-259, March.
    14. Jeffrey M. Wooldridge, 2005. "Fixed-Effects and Related Estimators for Correlated Random-Coefficient and Treatment-Effect Panel Data Models," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 385-390, May.
    15. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "The worldwide governance indicators project : answering the critics," Policy Research Working Paper Series 4149, The World Bank.
    16. Mike W Peng & Denis Y L Wang & Yi Jiang, 2008. "An institution-based view of international business strategy: a focus on emerging economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(5), pages 920-936, July.
    17. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
    18. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    19. Daron Acemoglu & Melissa Dell, 2010. "Productivity Differences between and within Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 169-188, January.
    20. Mike Wright & Igor Filatotchev & Robert E. Hoskisson & Mike W. Peng, 2005. "Strategy Research in Emerging Economies: Challenging the Conventional Wisdom," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 1-33, January.
    21. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    22. Kusnadi, Yuanto & Yang, Zhifeng & Zhou, Yuxiao, 2015. "Institutional development, state ownership, and corporate cash holdings: Evidence from China," Journal of Business Research, Elsevier, vol. 68(2), pages 351-359.
    23. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    24. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1371-1411.
    25. Yadong Luo, 2007. "Are joint venture partners more opportunistic in a more volatile environment?," Strategic Management Journal, Wiley Blackwell, vol. 28(1), pages 39-60, January.
    26. John Child & David K Tse, 2001. "China's Transition and its Implications for International Business," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(1), pages 5-21, March.
    27. Nguyen, Ha & Jaramillo, Patricio A., 2014. "Institutions and firms'return to innovation : evidence from the world bank enterprise survey," Policy Research Working Paper Series 6918, The World Bank.
    28. Christine M. Chan & Shige Makino & Takehiko Isobe, 2010. "Does subnational region matter? Foreign affiliate performance in the United states and China," Strategic Management Journal, Wiley Blackwell, vol. 31(11), pages 1226-1243, November.
    29. Brian Shaffer & Amy J. Hillman, 2000. "The development of business–government strategies by diversified firms," Strategic Management Journal, Wiley Blackwell, vol. 21(2), pages 175-190, February.
    30. Stephen Oluwatobi & Uchenna Efobi & Isaiah Olurinola & Philip Alege, 2015. "Innovation in Africa: Why Institutions Matter," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 390-410, September.
    31. Guo, Di & Guo, Yan & Jiang, Kun, 2016. "Government-subsidized R&D and firm innovation: Evidence from China," Research Policy, Elsevier, vol. 45(6), pages 1129-1144.
    32. Granville, Brigitte & Leonard, Carol S., 2010. "Do Informal Institutions Matter for Technological Change in Russia? The Impact of Communist Norms and Conventions, 1998-2004," World Development, Elsevier, vol. 38(2), pages 155-169, February.
    33. Yadong Luo, 2003. "Industrial dynamics and managerial networking in an emerging market: the case of China," Strategic Management Journal, Wiley Blackwell, vol. 24(13), pages 1315-1327, December.
    34. Hipp, Christiane & Grupp, Hariolf, 2005. "Innovation in the service sector: The demand for service-specific innovation measurement concepts and typologies," Research Policy, Elsevier, vol. 34(4), pages 517-535, May.
    35. Roberto Martin N Galang, 2012. "Government efficiency and international technology adoption: The spread of electronic ticketing among airlines," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(7), pages 631-654, September.
    36. MARA FACCIO & RONALD W. MASULIS & JOHN J. McCONNELL, 2006. "Political Connections and Corporate Bailouts," Journal of Finance, American Finance Association, vol. 61(6), pages 2597-2635, December.
    37. Wubiao Zhou, 2014. "Regional institutional development, political connections, and entrepreneurial performance in China’s transition economy," Small Business Economics, Springer, vol. 43(1), pages 161-181, June.
    38. Christine Oliver, 1997. "Sustainable competitive advantage: combining institutional and resource‐based views," Strategic Management Journal, Wiley Blackwell, vol. 18(9), pages 697-713, October.
    39. Christine M. Chan & Takehiko Isobe & Shige Makino, 2008. "Which country matters? Institutional development and foreign affiliate performance," Strategic Management Journal, Wiley Blackwell, vol. 29(11), pages 1179-1205, November.
    40. Canfei He & Yehua Dennis Wei & Xiuzhen Xie, 2008. "Globalization, Institutional Change, and Industrial Location: Economic Transition and Industrial Concentration in China," Regional Studies, Taylor & Francis Journals, vol. 42(7), pages 923-945.
    41. Seung Ho Park & Shaomin Li & David K Tse, 2006. "Market liberalization and firm performance during China's economic transition," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(1), pages 127-147, January.
    42. Lin, Chen & Lin, Ping & Song, Frank, 2010. "Property rights protection and corporate R&D: Evidence from China," Journal of Development Economics, Elsevier, vol. 93(1), pages 49-62, September.
    43. Klaus E. Meyer & Hung Vo Nguyen, 2005. "Foreign Investment Strategies and Sub‐national Institutions in Emerging Markets: Evidence from Vietnam," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 63-93, January.
    44. Gautam Ahuja & Sai Yayavaram, 2011. "PERSPECTIVE ---Explaining Influence Rents: The Case for an Institutions-Based View of Strategy," Organization Science, INFORMS, vol. 22(6), pages 1631-1652, December.
    45. Casson, Mark C. & Della Giusta, Marina & Kambhampati, Uma S., 2010. "Formal and Informal Institutions and Development," World Development, Elsevier, vol. 38(2), pages 137-141, February.
    46. Weilei (Stone) Shi & Sunny Li Sun & Mike W. Peng, 2012. "Sub-National Institutional Contingencies, Network Positions, and IJV Partner Selection," Journal of Management Studies, Wiley Blackwell, vol. 49(7), pages 1221-1245, November.
    47. Schøtt, Thomas & Jensen, Kent Wickstrøm, 2016. "Firms’ innovation benefiting from networking and institutional support: A global analysis of national and firm effects," Research Policy, Elsevier, vol. 45(6), pages 1233-1246.
    48. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources, and entry strategies in emerging economies," Strategic Management Journal, Wiley Blackwell, vol. 30(1), pages 61-80, January.
    49. Weiting Zheng & Kulwant Singh & Will Mitchell, 2015. "Buffering and enabling: The impact of interlocking political ties on firm survival and sales growth," Strategic Management Journal, Wiley Blackwell, vol. 36(11), pages 1615-1636, November.
    50. Jonathan Levie & Erkko Autio, 2008. "A theoretical grounding and test of the GEM model," Small Business Economics, Springer, vol. 31(3), pages 235-263, October.
    51. Moses Acquaah, 2007. "Managerial social capital, strategic orientation, and organizational performance in an emerging economy," Strategic Management Journal, Wiley Blackwell, vol. 28(12), pages 1235-1255, December.
    52. Yanmei Zhu & Xinhua Wittmann & Mike Peng, 2012. "Institution-based barriers to innovation in SMEs in China," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 1131-1142, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ma, Xufei & Ding, Zhujun & Yuan, Lin, 2016. "Subnational institutions, political capital, and the internationalization of entrepreneurial firms in emerging economies," Journal of World Business, Elsevier, vol. 51(5), pages 843-854.
    2. Jianghua Zhou & Rui Wu & Jizhen Li, 2019. "More ties the merrier? Different social ties and firm innovation performance," Asia Pacific Journal of Management, Springer, vol. 36(2), pages 445-471, June.
    3. Jing Zhang & Justin Tan & Poh Wong, 2015. "When does investment in political ties improve firm performance? The contingent effect of innovation activities," Asia Pacific Journal of Management, Springer, vol. 32(2), pages 363-387, June.
    4. White, George O. & Boddewyn, Jean J. & Galang, Roberto Martin N., 2015. "Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines," Journal of World Business, Elsevier, vol. 50(2), pages 342-356.
    5. White, George O. & Hemphill, Thomas & Weber, Thomas & Moghaddam, Kaveh, 2018. "Institutional origins of WOFS formal contracting: A judicial arbitrariness perspective," International Business Review, Elsevier, vol. 27(3), pages 654-668.
    6. Wang, Chengqi & Kafouros, Mario & Yi, Jingtao & Hong, Junjie & Ganotakis, Panagiotis, 2020. "The role of government affiliation in explaining firm innovativeness and profitability in emerging countries: Evidence from China," Journal of World Business, Elsevier, vol. 55(3).
    7. Sun, Sunny Li & Peng, Mike W. & Lee, Ruby P. & Tan, Weiqiang, 2015. "Institutional open access at home and outward internationalization," Journal of World Business, Elsevier, vol. 50(1), pages 234-246.
    8. Chan, Christine M. & Du, Jialin, 2022. "Formal institution deficiencies and informal institution substitution: MNC foreign ownership choice in emerging economy," Journal of Business Research, Elsevier, vol. 142(C), pages 744-761.
    9. Megan Min Zhang & Paul W. Beamish, 2019. "An institutional response model to economic liberalization: Japanese MNEs’ ownership choices in China," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 33-59, March.
    10. Mike W. Peng & Joyce C. Wang & Nishant Kathuria & Jia Shen & Miranda J. Welbourne Eleazar, 2023. "Toward an institution-based paradigm," Asia Pacific Journal of Management, Springer, vol. 40(2), pages 353-382, June.
    11. Sunny Li Sun & Mike W. Peng & Weiqiang Tan, 2017. "Institutional relatedness behind product diversification and international diversification," Asia Pacific Journal of Management, Springer, vol. 34(2), pages 339-366, June.
    12. Yang, Jie, 2018. "Subnational Institutions and Location Choice of Emerging Market Firms," Journal of International Management, Elsevier, vol. 24(4), pages 317-332.
    13. Zhao, Hongxin & Lu, Jiangyong, 2016. "Contingent value of political capital in bank loan acquisition: Evidence from founder-controlled private enterprises in China," Journal of Business Venturing, Elsevier, vol. 31(2), pages 153-174.
    14. Weiqi Dai & Mingqing Liao, 2019. "Entrepreneurial attention to deregulations and reinvestments by private firms: Evidence from China," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1221-1250, December.
    15. Vikrant Shirodkar & Palitha Konara, 2017. "Institutional Distance and Foreign Subsidiary Performance in Emerging Markets: Moderating Effects of Ownership Strategy and Host-Country Experience," Management International Review, Springer, vol. 57(2), pages 179-207, April.
    16. Lindner, Thomas & Muellner, Jakob & Puck, Jonas, 2016. "Cost of Capital in an International Context: Institutional Distance, Quality, and Dynamics," Journal of International Management, Elsevier, vol. 22(3), pages 234-248.
    17. Hongjuan Zhang & Rong Han & Liang Wang & Runhui Lin, 2021. "Social capital in China: a systematic literature review," Asian Business & Management, Palgrave Macmillan, vol. 20(1), pages 32-77, February.
    18. Hongjuan Zhang & Rong Han & Liang Wang & Runhui Lin, 0. "Social capital in China: a systematic literature review," Asian Business & Management, Palgrave Macmillan, vol. 0, pages 1-46.
    19. George O. White & Jean J. Boddewyn & Tazeeb Rajwani & Thomas A. Hemphill, 2018. "Regulator Vulnerabilities to Political Pressures and Political Tie Intensity: The Moderating Effects of Regulatory and Political Distance," Management International Review, Springer, vol. 58(5), pages 743-769, October.
    20. Gerald Yong Gao & Danny Tan Wang & Yi Che, 2018. "Impact of historical conflict on FDI location and performance: Japanese investment in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(8), pages 1060-1080, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2018:i:1:p:63-:d:192654. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.