State as a path breaker? Path-dependent behaviours and firm innovation: the moderating role of institutional forces

Abstract

ABSTRACT This paper explores the effects and mechanisms of institutional forces on the relationship between path-dependent behaviours and innovation performance from an integrated framework combining path dependence and institution-based views. We first examine the effects of path-dependent behaviours, manifested as product line retention and extension, on incremental and radical innovation performance. In investigating this relationship, we join the institution-based view and propose that the effects of path-dependent behaviours are contingent on political and economic institutional forces. Using the samples of Chinese listed pharmaceutical enterprises from 2010 to 2016, we reveal that path-dependent behaviours are conducive to incremental innovation but detrimental to radical innovation. More importantly, while economic institutional forces can enhance the effects of these behaviours on both types of innovation, political institutional forces can mitigate their negative impact on radical innovation.