Effect of Institutional Configuration on Innovation Activities in East Asian Firms

Abstract

This paper looks to contribute to the recent literature on institutional comparative analyses of Asian economies; it makes three distinct contributions. First, the authors investigate the institutional diversity of Asian economies by using multivariate methods, and show five different groups within Asian economies that can be distinguished from advanced economies. Second, based on firm-level data, they determine whether institutional environments have a favorable effect on the innovation activities of firms; concurrently, and discuss whether or not joining a global supply chain induces firms to engage in innovation activities. Their analytical results show that institutional characteristics have a positive effect on firms’ decisions to engage in those activities, and that institutional configurations provide the foundation for a global supply chain built in East Asian economies. Third, the authors emphasize that the current institutional diversity can persist, given the positive interaction between the institutional diversity of Asian economies and the innovation activities of Asian firms.