The influence of government affiliations on firm product innovation in a dynamic institutional environment: insights from China

Abstract

PurposeBuilding on resource dependence theory and the dynamic institution-based view, this paper examines the influence of government affiliations on firm product innovation in a dynamic institutional environment.Design/methodology/approachUsing unique panel data of Chinese manufacturing firms covering a period of 12 years (1998–2009) with 2,564,547 firm-year observations, this study chooses the panel Tobit model with random effects to explore the influence of government affiliations on firm product innovation, followed by an analysis to test the moderation effects of dynamic institutional environments.FindingsThe study findings suggest that Chinese firms with higher-level government affiliations have a relatively high product innovation performance. It finds that this innovation stimulating effect is contingent on the dynamic nature of the institutional environment. To be specific, a high speed of institutional transition may depress the positive innovation effects of government affiliations, while a more synchronized transition speed of institutional components may enhance the positive innovation effects of firms' government affiliations.Originality/valueThis study adds to a better understanding of the drivers of product innovation in Chinese firms that are situated in environments that are characterized by institutional change, using and contributing to resource dependence theory and the dynamic institution-based view.