The impact of balance in the policy mix on firm innovation performance: A motivation–opportunity–ability perspective

Combining technology-push and demand-pull instruments into a policy mix has been widely employed by policymakers to stimulate innovation. Prior empirical studies have primarily investigated the impacts of the balance between the two types of instruments within a policy mix on innovation performance at the macro or meso level, with limited attention given to the roles of micro-level policy recipients and the contexts in which policies are implemented. By integrating the motivation-opportunity-ability framework with the resource-based view and institutional theory, this study provides a comprehensive understanding of how the effectiveness of a balanced policy mix in stimulating innovation is contingent upon the internal and external contexts of policy-recipient firms. Our empirical analyses are based on a panel dataset of 77 listed firms in the solar photovoltaic industry of China from 2012 to 2022. We find that the balance between technology-push and demand-pull policy instruments within a policy mix has a positive effect on firm innovation performance. Moreover, this relationship is contingent upon firms’ internal absorptive capacity and regional institutional development, and their relative importance differs between state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs). The moderating effect of absorptive capacity is particularly pronounced for non-SOEs, whereas the moderating effect of regional institutional development is primarily salient for SOEs. This study extends the innovation literature on policy mix by shedding light on the innovation effect of policy mix balance at the micro level and its contingencies.