Environmental turbulence, network position and firm innovation: evidence from a natural experiment in China

Abstract

Purpose This study aims to explore the relationship between network position and innovation under major environmental turbulence. Design/methodology/approach The authors use a difference-in-differences identification approach using the 2009 Industry Revitalization Plan in response to the global financial crisis as a natural experiment with a sample of Chinese listed firms from 2001 to 2017. Findings The findings show that a major environmental turbulence can facilitate firm innovation, and firms that occupy central positions in the interlock network show worse innovation performance while firms with high brokerage show better innovation performance. Originality/value The literature on environmental implication has largely focused on the threats and overlooked the potential opportunities. Moreover, social network literature has elaborated on the benefits and constraints of network positions from a static perspective but largely overlooked their implications facing environmental change. By exploring the bright side of major environmental turbulence and including this factor as a key contingency in exploring the effects of centrality and brokerage, this study integrates external environmental context with social network research and provides empirical evidence responding to the call for more attention to network dynamics and extends our understanding of the context-contingent network effects on firm innovation.