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.
Bibliographical noteThis article belongs to the Special Issue Transition from China-Made to China-Innovation
- Business-government ties
- Institution-based view of business strategy
- Institutional transition
- Manufacturing firms' product innovation