Success Factors for Product Innovation in China’s Manufacturing Sector: Strategic Choice and Environment Constraints

Abstract

This study examines what factors contribute to firm innovation performance as a result of successful launch of new products in China. Rather than simply applying theories of product innovation often developed in the West, this study takes an indigenous perspective to explore what product strategies and which environment factors, defined by Chinese managers, contribute to the improved firm performance. With the data of Chinese firms from over 40 cities across the country, this study surveys more than 700 manufacturing firms that have introduced new products to the market. The result shows that while a defensive product strategy is negatively related to a firm’s patent application, a prospector strategy helps increase its market share in China. In addition, innovation policy and total R&D investment drive a firm to sell more products overseas and increase its new product sales across the globe. Local talent market can also help improve a firm’s patent application but often drive the firm to focus more on domestic markets. Implications of the results for theory and practice are discussed.