Internal power dynamics: impact of government innovation policies on firm commercialization

Abstract

This study develops a theory of interactive power dynamics to examine the effect of government innovation policies on firms’ new product commercialization. Our interactive power dynamics model suggests that such policies can disrupt the power relations between interdependent subgroups within a firm (in this context, research and development (R&D) and marketing teams). In the context of China’s Medium- and Long-Term Plan for Science and Technology Development (2006-2020) (MLP 2006), we argue that the growth in power of a firm’s R&D group arising from a need to meet the government’s expectations could reduce cooperation between R&D and marketing, with a consequent negative effect on new product commercialization. We further argue that if the R&D group is already more powerful, this exacerbates the negative impact, but a more powerful marketing group can mitigate it. We took a quasi-experimental approach to test our hypotheses using a large dataset from China and obtained support for our theoretical model. Ultimately, our study offers a number of policy and managerial implications.