IDEAS home Printed from https://ideas.repec.org/a/eee/iburev/v29y2020i2s0969593118303895.html
   My bibliography  Save this article

A causal analysis of the role of institutions and organizational proficiencies on the innovation capability of Chinese SMEs

Author

Listed:
  • Zhang, Man
  • Merchant, Hemant

Abstract

We attempt to advance the existing narrative about the role of local institutions vis-à-vis the organizational capabilities of Chinese SMEs, and the influence of such linkages on the innovation capability of these firms. Specifically, we complement recent work by investigating the impact of macro- as well as micro-level aspects of Chinese institutions (Government support; Guanxi) on the ‘Improvisation’ and ‘Learning’ capabilities of Chinese SMEs and, ultimately, these firms’ innovation capability. Our conceptual arguments are embedded in Institutional, Organizational learning, and Resource-based theories. We isolate, unpack, and discuss several inter-related, yet distinct, causal mechanisms that ultimately influence Chinese SMEs’ innovation capability development. Based on a Partial Least Squares analysis of more than 200 firms, we find empirical support for all six hypotheses which represent the above-mentioned relationships. Our findings offer insights pertaining to: (1) the relative impact of institutional versus firm-specific factors in developing organizational proficiencies, (2) the mapping of macro- and micro-level institutional effects on organizational proficiencies, and (3) the relative effect of organizational proficiencies on innovation performance.

Suggested Citation

  • Zhang, Man & Merchant, Hemant, 2020. "A causal analysis of the role of institutions and organizational proficiencies on the innovation capability of Chinese SMEs," International Business Review, Elsevier, vol. 29(2).
  • Handle: RePEc:eee:iburev:v:29:y:2020:i:2:s0969593118303895
    DOI: 10.1016/j.ibusrev.2019.101638
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969593118303895
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zhiqiang Wang & Baofeng Huo & Yu Tian & Zhongsheng Hua, 2015. "Effects of external uncertainties and power on opportunism in supply chains: evidence from China," International Journal of Production Research, Taylor & Francis Journals, vol. 53(20), pages 6294-6307, October.
    2. Tan, Justin, 2001. "Innovation and risk-taking in a transitional economy: A comparative study of chinese managers and entrepreneurs," Journal of Business Venturing, Elsevier, vol. 16(4), pages 359-376, July.
    3. 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.
    4. Mark Loon & Roy Chik, 2019. "Efficiency-centered, innovation-enabling business models of high tech SMEs: Evidence from Hong Kong," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 87-111, March.
    5. Alaka N Rao & Jone L Pearce & Katherine Xin, 2005. "Governments, reciprocal exchange and trust among business associates," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(1), pages 104-118, January.
    6. Sheng, Shibin & Zhou, Kevin Zheng & Lessassy, Leopold, 2013. "NPD speed vs. innovativeness: The contingent impact of institutional and market environments," Journal of Business Research, Elsevier, vol. 66(11), pages 2355-2362.
    7. Guillermo Cardoza & Gaston Fornes & Ping Li & Ning Xu & Song Xu, 2015. "China goes global: public policies' influence on small- and medium-sized enterprises' international expansion," Asia Pacific Business Review, Taylor & Francis Journals, vol. 21(2), pages 188-210, April.
    8. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    9. Klaus Uhlenbruck, 2004. "Developing acquired foreign subsidiaries: the experience of MNES in transition economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(2), pages 109-123, March.
    10. Zhou, Kevin Zheng & Gao, Gerald Yong & Yang, Zhilin & Zhou, Nan, 2005. "Developing strategic orientation in China: antecedents and consequences of market and innovation orientations," Journal of Business Research, Elsevier, vol. 58(8), pages 1049-1058, August.
    11. Chung-Leung Luk & Oliver H M Yau & Leo Y M Sin & Alan C B Tse & Raymond P M Chow & Jenny S Y Lee, 2008. "The effects of social capital and organizational innovativeness in different institutional contexts," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(4), pages 589-612, June.
    12. Hodgkinson, Ian R. & Hughes, Paul & Arshad, Darwina, 2016. "Strategy development: Driving improvisation in Malaysia," Journal of World Business, Elsevier, vol. 51(3), pages 379-390.
    13. Gülşen Akman & Cengiz Yilmaz, 2008. "Innovative Capability, Innovation Strategy And Market Orientation: An Empirical Analysis In Turkish Software Industry," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 12(01), pages 69-111.
    14. Madsen, Tage Koed & Servais, Per, 1997. "The internationalization of Born Globals: An evolutionary process?," International Business Review, Elsevier, vol. 6(6), pages 561-583, December.
    15. Robert Huggins & Piers Thompson, 2015. "Entrepreneurship, innovation and regional growth: a network theory," Small Business Economics, Springer, vol. 45(1), pages 103-128, June.
    16. Narjess Boubakri & Sattar A Mansi & Walid Saffar, 2013. "Political institutions, connectedness, and corporate risk-taking," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(3), pages 195-215, April.
    17. Dusya Vera & Mary Crossan, 2005. "Improvisation and Innovative Performance in Teams," Organization Science, INFORMS, vol. 16(3), pages 203-224, June.
    18. Han, Xia & Liu, Xiaohui & Xia, Tianjiao & Gao, Lan, 2018. "Home-country government support, interstate relations and the subsidiary performance of emerging market multinational enterprises," Journal of Business Research, Elsevier, vol. 93(C), pages 160-172.
    19. Seung Ho Park & Yadong Luo, 2001. "Guanxi and organizational dynamics: organizational networking in Chinese firms," Strategic Management Journal, Wiley Blackwell, vol. 22(5), pages 455-477, May.
    20. Roy Y J Chua & Michael W Morris & Paul Ingram, 2009. "Guanxi vs networking: Distinctive configurations of affect- and cognition-based trust in the networks of Chinese vs American managers," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(3), pages 490-508, April.
    21. Chris Hall, 2007. "When the dragon awakes: Internationalisation of SMEs in China and implications for Europe," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(02), pages 29-34, July.
    22. Lianxi Zhou & Wei-ping Wu & Xueming Luo, 2007. "Internationalization and the performance of born-global SMEs: the mediating role of social networks," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 673-690, July.
    23. Keh, Hean Tat & Nguyen, Thi Tuyet Mai & Ng, Hwei Ping, 2007. "The effects of entrepreneurial orientation and marketing information on the performance of SMEs," Journal of Business Venturing, Elsevier, vol. 22(4), pages 592-611, July.
    24. Karl E. Weick, 1998. "Introductory Essay—Improvisation as a Mindset for Organizational Analysis," Organization Science, INFORMS, vol. 9(5), pages 543-555, October.
    25. David Reeb & Mariko Sakakibara & Ishtiaq P Mahmood, 2012. "From the Editors: Endogeneity in international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(3), pages 211-218, April.
    26. Jiang, Marshall S. & Branzei, Oana & Xia, Jun, 2016. "DIY: How internationalization shifts the locus of indigenous innovation for Chinese firms," Journal of World Business, Elsevier, vol. 51(5), pages 662-674.
    27. Luo, Yadong, 2008. "The changing Chinese culture and business behavior: The perspective of intertwinement between guanxi and corruption," International Business Review, Elsevier, vol. 17(2), pages 188-193, April.
    28. Guangzhou Hu, Albert, 2001. "Ownership, Government R&D, Private R&D, and Productivity in Chinese Industry," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 136-157, March.
    29. Ge, Jianhua & Stanley, Laura J. & Eddleston, Kimberly & Kellermanns, Franz W., 2017. "Institutional deterioration and entrepreneurial investment: The role of political connections," Journal of Business Venturing, Elsevier, vol. 32(4), pages 405-419.
    30. Zhenzhen Xie & Jiatao Li, 2018. "Exporting and innovating among emerging market firms: The moderating role of institutional development," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(2), pages 222-245, February.
    31. Jiménez-Jiménez, Daniel & Sanz-Valle, Raquel, 2011. "Innovation, organizational learning, and performance," Journal of Business Research, Elsevier, vol. 64(4), pages 408-417, April.
    32. Adomako, Samuel & Opoku, Robert A. & Frimpong, Kwabena, 2018. "Entrepreneurs' improvisational behavior and new venture performance: Firm-level and institutional contingencies," Journal of Business Research, Elsevier, vol. 83(C), pages 10-18.
    33. Jie Wu, 2013. "Diverse Institutional Environments and Product Innovation of Emerging Market Firms," Management International Review, Springer, vol. 53(1), pages 39-59, February.
    34. Donald D. Bergh & Elizabeth Ngah‐Kiing Lim, 2008. "Learning how to restructure: absorptive capacity and improvisational views of restructuring actions and performance," Strategic Management Journal, Wiley Blackwell, vol. 29(6), pages 593-616, June.
    35. Wang, Cheng Lu & Chung, Henry F.L., 2013. "The moderating role of managerial ties in market orientation and innovation: An Asian perspective," Journal of Business Research, Elsevier, vol. 66(12), pages 2431-2437.
    36. Guo, Hai & Xu, Erming & Jacobs, Mark, 2014. "Managerial political ties and firm performance during institutional transitions: An analysis of mediating mechanisms," Journal of Business Research, Elsevier, vol. 67(2), pages 116-127.
    37. Shibin Sheng & Kevin Zheng Zhou & L. Lessassy, 2013. "NPD speed vs. innovativeness: The contingent impact of institutional and market environments," Post-Print halshs-00862665, HAL.
    38. Claudio Petti & Lauretta Rubini & Silvia Podetti, 2017. "Government Support and R&D Investment Effectiveness in Chinese SMEs: A Complex Relationship," Asian Economic Papers, MIT Press, vol. 16(1), pages 201-226, Winter/Sp.
    39. George P. Huber, 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science, INFORMS, vol. 2(1), pages 88-115, February.
    40. Wang, Yueping & Yao, Yang, 2002. "Market Reforms, Technological Capabilities and the Performance of Small Enterprises in China," Small Business Economics, Springer, vol. 18(1-3), pages 197-211, Feb.- May.
    41. Maurizio Zollo & Sidney G. Winter, 2002. "Deliberate Learning and the Evolution of Dynamic Capabilities," Organization Science, INFORMS, vol. 13(3), pages 339-351, June.
    42. Changhui Zhou & Jing Li, 2008. "Product innovation in emerging market-based international joint ventures: An organizational ecology perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(7), pages 1114-1132, October.
    43. Child, John & Hsieh, Linda & Elbanna, Said & Karmowska, Joanna & Marinova, Svetla & Puthusserry, Pushyarag & Tsai, Terence & Narooz, Rose & Zhang, Yunlu, 2017. "SME international business models: The role of context and experience," Journal of World Business, Elsevier, vol. 52(5), pages 664-679.
    44. Maksimov, Vladislav & Wang, Stephanie Lu & Luo, Yadong, 2017. "Institutional imprinting, entrepreneurial agency, and private firm innovation in transition economies," Journal of World Business, Elsevier, vol. 52(6), pages 854-865.
    45. Dirk Holtbrügge & Sue Claire Berning, 2018. "Market Entry Strategies and Performance of Chinese Firms in Germany: The Moderating Effect of Home Government Support," Management International Review, Springer, vol. 58(1), pages 147-170, February.
    46. Claudia U. Ciborra, 1996. "The Platform Organization: Recombining Strategies, Structures, and Surprises," Organization Science, INFORMS, vol. 7(2), pages 103-118, April.
    47. 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.
    48. Yi, Jingtao & Wang, Chengqi & Kafouros, Mario, 2013. "The effects of innovative capabilities on exporting: Do institutional forces matter?," International Business Review, Elsevier, vol. 22(2), pages 392-406.
    49. Jiangyong Lu & Xiaohui Liu & Mike Wright & Igor Filatotchev, 2014. "International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 428-449, May.
    50. Weerawardena, Jay & O'Cass, Aron & Julian, Craig, 2006. "Does industry matter? Examining the role of industry structure and organizational learning in innovation and brand performance," Journal of Business Research, Elsevier, vol. 59(1), pages 37-45, January.
    Full references (including those not matched with items on IDEAS)

    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:eee:iburev:v:29:y:2020:i:2:s0969593118303895. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/133/description#description .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.