Abstract
This paper interprets how firms dual institutional capital, derived from reactions to the institutional voids in Chinas emerging economy, influences their innovativeness. From the institution-based view, this study proposes that formal institutional capital and informal institutional capital have different curvilinear effects on firms innovativeness, and such effects are contingent upon innovation generation (technological capability) and innovation appropriation (appropriability regime) mechanisms. Based on the multiple informant responses from 303 firms in China, we found that formal institutional capital has an increasingly positive effect on a firms innovativeness; on the contrary, informal institutional capital has a decreasingly positive effect on a firms innovativeness. Furthermore, technological capability would weaken/strengthen the positive effects of formal institutional capital/informal institutional capital on a firms innovativeness, while appropriability regime would strengthen/weaken the positive effects of formal institutional capital/informal institutional capital on a firms innovativeness.
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