Firm Innovation Research Articles

The key role of market orientation in innovation ambidexterity in agribusiness firms

AbstractThe objective of this study is to examine the relationships between market orientation, organizational culture, proactive management, organizational climate, and organizational structure on the innovative orientation (exploitative and exploratory innovation). Little research has been conducted to examine the relationship between these organizational dimensions and innovation orientation. This study offers this and provides a particular type of companies (agribusiness) and context (Extremadura, Spain). Quantitative approach, by using structural modelling equations, to analyze data from 151 innovative agri-food firms was used in this study. Then, using a fuzzy set qualitative comparative analysis (fsQCA), was carried out to obtain additional insights. The main result find that market orientation plays a key role both in exploitative and exploratory innovation in agribusiness firms. Innovation exploitation is influenced by the firm’s organic structure. Results from fsQCA provide valuable findings showing that innovation exploitation and exploration result from distinct organizational configurations, thus providing valuable insights for decision and policy-making.

Cross-shareholding, financing constraints and firm innovation efficiency

Cross-shareholding by corporate subsidiaries and parent companies is a form of equity transaction within an enterprise group. This form of transaction can, to a certain extent, reduce the difficulty of corporate financing and improve the efficiency of corporate innovation. This paper analyzes the influence mechanism and effect of corporate sub-parent company cross-shareholding through a review of related theoretical and empirical studies, and conducts experimental research using instrumental variables, psm and other methods to eliminate endogeneity. The study's results indicate that cross-shareholding between corporate sub-parent companies positively affects corporate financing difficulties and innovation efficiency. The study also finds that there are some limitations and risks associated with its application, so enterprises should choose and use this form of transaction carefully in practice to maximize its potential advantages.

The effect of government subsidies on firms’ innovation performance: does subsidy continuity matter?

ABSTRACT This study investigates the effects of government subsidies on firms’ innovation performance along with the role of subsidy continuity. Using data from Chinese industrial enterprise between 2002–2007 and 2011–2015 and considering firms’ historical records of receiving government subsidies, we divided the firms into different categories based on their recipience of subsidy continuity and checked for heterogeneous treatment effects among them. The results showed that subsidized firms invest more in R&D and demonstrate superior performance in TFP compared to non-subsidized firms. Furthermore, the stimulatory effects on R&D investment and TFP are more pronounced for firms that receive repeated and continuous government subsidies. In addition, the impact of subsidy continuity on innovation performance is more significant for non-state-owned firms, small firms, low-profit firms, and firms with fewer fixed assets. This may be because continuous subsidies can help firms overcome financing constraints, which in turn fosters innovation performance. Our findings contribute to the understanding of the diverse effects of government subsidies on firm innovation and provide insights into the possible channels for achieving such outcomes.

Navigating the double-edged sword: how does big data affect firm innovation under different investment combinations?

ABSTRACT Although big data has been claimed to revolutionise the way firms innovate, there is still a lack of knowledge about how big data affects firm innovation under different investment combinations. Drawing on the resource-based view, organisation learning theory, and organisation change theory, we introduce big data into a Kline-Rosenberg chain-linked model to propose that firms harness information value from big data to improve innovation output while organisation-wide adjustments increase innovation risk. Based on the data collected from Chinese listed firms, our empirical results reveal that combining big data and R&D investment can improve innovation output and reduce innovation risk. In contrast, combining big data and IT investment significantly increases innovation risk. The finding that overinvesting in IT enhances firm innovation risk contributes novel insights to the literature by contradicting the belief that investment is beneficial to innovation.

Environmental regulation and carbon emission efficiency: Evidence from pollution levy standards adjustment in China.

China's economy experienced great growth, which also induces large carbon emission. Facing the target of "Carbon peak, Carbon neutrality" in China, it is vital to improve the carbon emission efficiency. Employing the spatial Difference-in-Differences model, this paper investigates the impact of environmental regulation on carbon emission efficiency with a quasi-natural experiment of Pollution Levy Standards Adjustment in China. Our empirical results show that the environmental regulation can significantly improve the carbon emission efficiency. moreover, two impact channels are explored: green innovation and industrial upgrading. More specifically, the green innovation increases with environmental regulation, and the increased green innovation improves carbon emission efficiency. The industry upgrading increases with environmental regulation, and the increased industry upgrading improves carbon emission efficiency. Finally, in terms of city heterogeneity, we find that the impact of environmental regulation will be more pronounced for larger cities and resource-based cities. Our findings suggest that the environmental regulation must be enhanced for both smaller cities and non-resource-based cities. Moreover, to promote the green innovation of firms, since green innovation is risky and costly, governments should provide more subsidies or grants on corporate green technologies, thus firms will be motivated to invest in green technologies to reduce carbon emission.

Labour market mobility, knowledge diffusion, and firm innovation: empirical evidence from Chinese industrial enterprise

ABSTRACT Economic growth thrives on innovation, which is a byproduct of efficient labour utilisation. Labour market mobility, fostering knowledge exchange, is crucial for inducing innovation in firms through labour. However, prior studies on this dynamic, mostly limited to developed economies, provide inconsistent conclusions. China, a crucial player in the developing world, has been insufficiently investigated. To address this gap, our study investigates this relationship using China as a model, providing insights valuable to other developing nations. The results indicate that increased labour mobility significantly promotes technological innovation in local firms, especially in areas that emphasize design and high-quality innovation. Importantly, the influence of labour mobility on innovation varies across administrative divisions, such as provinces, cities, and counties, leading to diverse effects on firm-level innovation. Furthermore, the impact of labour mobility is particularly significant in privately-owned enterprises and firms situated in the eastern region. The crucial role of knowledge diffusion, serving as a mediator through which labour mobility enhances firm innovation, is emphasized, highlighting its significance. In conclusion, this study effectively establishes how labour market mobility shapes firm innovation, offering practical policy directions for China’s urban talent strategies and innovation enhancement.

Firm Innovation, Financial Constraints and Exports: Evidence From Indian SMEs

Using rich firm-level data on 4517 small and medium-sized Indian manufacturing firms, we explore the implications of financial constraints on firm innovation and further investigate the interplay between financial constraints and export participation on firm innovation. Our findings highlight a negative association between firm innovation and financial constraints and a positive association between firm innovation and export. Moreover, we find that firms participating in international trade are well-positioned to offset the challenges of financial constraints on firm innovation.

Does audit quality affect firm innovation?

This paper investigates the impact of audit quality on firm innovation. We develop a theoretical intertemporal framework to model an entrepreneur's optimal behavior and find that entrepreneurs increase R&D with an increase in audit quality. Using a sample of Chinese firms listed on Shanghai Security Exchange and Shenzhen Security Exchange over the period 2011–2020, we employ “Going Concern Opinions,” an indicator gauging a firm's ability to continue operation or to avoid bankruptcy, as a proxy of audit quality. To address endogeneity concerns, we construct a Bartik shift-share instrument based on the differential impact of common shocks on firms with pre-determined exposures. Our empirical results are consistent with the proposition drawn from the theoretical model. Through a decomposition analysis with Rotermberg weights, we also identified the top ten industries and the years demonstrating the most significant impact of audit quality on firm innovation.

Private equity market development, state ownership, and firm innovation: Evidence from China

In this work, we examine how private equity (PE) market development affects firm innovation. Using a large sample containing 2,568,137 firm-year observations of nonlisted firms in China and an ordinary least squares (OLS) regression model, we show that firms in regions with more developed PE markets exhibit a disproportionally higher level of innovation as proxied by patent quantity and quality. We further find that state ownership mitigates the positive effects of PE market development on firm innovation. Moreover, this mitigating effect of state ownership is more pronounced during a politically uncertain period and in industries showing greater dependence on external finance or receiving less support from government policy. Our results are robust to matched sample analysis, alternative measures of PE market development and innovation, and instrument variable tests and analysis on the change of ownership.

Inter-organizational governance and innovation under different local institutional contexts

Abstract This article examines the effect of formal and informal institutional settings and of the governance of inter-organizational relationships on innovation at the cluster level. The research primarily relies on quantitative methods, utilizing data obtained from a survey involving 115 firms and 12 in-depth interviews. Supplementary qualitative information from the interviews has also been incorporated into the analysis. The results support the hypothesis that innovative firms should consider not only the impact of different governance modes but also how these modes align with the existing local contexts. Failure to do so may result in firms becoming entrenched in the prevailing practices and products of a specific location.

Digital economy, peer influence, and persistent green innovation of firms: a mixed embeddedness perspective.

Persistent green innovation helps enterprises save energy, reduce pollution, and continue to gain economic benefits. However, existing studies explored the economic and organizational factors influencing firms' persistent green innovation while neglecting peer influence in the digital economy. This study examines the impact of digital economy and peer influence on persistent green innovation using data of Chinese-listed companies from 2011 to 2019. The results show that digital economy and peer influence positively affect persistent green innovation. Moreover, digital economy plays a competitive mediating role between peer influence and persistent green innovation. The results of further research show that both the time lag term of peer influence and spatial lag term of digital economy affect persistent green innovation. This study incorporates the three-level elements of enterprise, peer, and city into a unified framework, providing theoretical reference and practical guidance for green innovation to enhance the competitive advantage of enterprises.

Research on the Impact of State-owned Enterprise Privatization Reform on Firm Innovation

Over the past few decades of state-owned enterprise (SOE) privatization in China, though many studies have been done concerning different aspects of relationship between the privatization of SOE and firm development, little was known about the impact of state-owned enterprise privatization reform on firm innovation. Some of the prior literature didn’t manage to provide a convincing result to a certain extent as the data the chose was not enough. This article utilizes a substantial dataset of more than 28,000 listed companies that have undergone privatization, extracting the R&D expenditure data of listed companies from Wind database spanning from 2010 to 2022. After systematic investigation of the impact of SOE privatization (as measured by a dummy variable) on innovation (as measured by R&D investment) using the model of regression, it can be found that the privatization of state-owned enterprises in my country has had a negative impact on corporate innovation, as certain preconditions are needed for the success of privatization and restructuring, which plays a vital role in avoiding certain risks after privatization.

Capital tax incentives and firm innovation: evidence from accelerated depreciation in China

PurposeThis study aims to investigate the influence and impact mechanism of capital tax incentives on firm innovation.Design/methodology/approachThis study employs the difference-in-differences (DID) method, in conjunction with the exogenous impact of accelerated depreciation (AD) pilot policy. This study selects Chinese listed companies from 2010 to 2017 as the research sample.FindingsFirstly, AD exerts a substantial positive effect on the quantity and quality of the innovation output of firms, and the positive impact results primarily from heightened investment in fixed assets, particularly, machinery and equipment. Secondly, the influence of the policy is pronounced in non-state-owned enterprises, mature enterprises, less capital-intensive enterprises and non-high-tech industries, which all exhibit strong innovation incentives. Lastly, the tax incentive policy significantly stimulates firm innovation in the short term, but its long-term impact on innovation incentives lacks statistical significance.Originality/valueThis study highlights the significance of capital tax incentives in facilitating the innovation process in firms.

Operating risk of enterprises when adopting environmental regulation: Evidence from environmental protection law in China

Addressing the negative externality of pollutant emissions requires environmental regulations. The well-designed environmental regulation can stimulate innovation and reinforce management, which may lead to operating risk decreases in heavily polluting firms. This study evaluates the effect of environmental regulations using the enactment of the Chinese New Environmental Protection Law (NEPL) in 2015 as an exogenous shock. Our difference-in-differences estimation shows that the deterrent of the NEPL reduces the operating risk of heavily polluting firms, and the relationships are robust to different specifications and alternative settings. We also find that the impact of the NEPL is more pronounced in subsamples with higher ex-ante innovation and improved environmental management. Further evidence shows that innovative firms may be better positioned to develop green technologies by patenting to comply with environmental regulations. Moreover, the improved environmental management practices under regulations may attract more analyst attention which help firms build a positive reputation in the market. Such responses to comply with environmental regulations ultimately reduce the operating risk of firms. Overall, our study sheds light on the micro mechanisms behind the NEPL's effect on firms' operating risk, providing implications and references for policymakers and firm managers.

Administrative monopoly regulation and environmental innovation: An analysis based on China's asymmetric market structure

To better understand the role of the competitive environment for firm innovation, this study takes China's Fair Competition Review System as an example to explore the impact of administrative monopoly regulation on environmental innovation. By utilizing China's market Structure, the study devises a quasi-natural experiment. It employs the DID method to assess the causal relationship between administrative monopoly regulation and the firm's environmental innovation. The findings indicate that implementing the Fair Competition Review System induces a marked reduction in environmental innovation by firms in the administrative monopoly sector, suggesting a substantial inhibition effect of the policy.Further research shows that this inhibition effect primarily manifests in the short term. Breaking administrative monopoly and optimizing the market environment wield the potential to increase firm environmental innovation in the long term. Evidence from the mechanism analysis highlights the critical roles played by factors such as industry competition, industry environmental uncertainty, R&D investments, financial constraints, and government subsidies in driving this process.

Geographic Proximity And Firm Innovation: Evidence From The Chinese Manufacturing Industry

Innovation, competitive advantage, and firm performance are all positively affected by knowledge-sharing techniques. We consider the geographic proximity to research institutes as a proxy of the efficiency of knowledge sharing. We examine how and to what degree the practice of knowledge-sharing influences businesses' innovation using a sample of Chinese manufacturing companies chosen between 2009 and 2021. Thus, the relationship between corporate innovation and closeness to research institutions is investigated experimentally in this study. The decisive findings indicate that a company's ability to innovate is strongly impacted by its proximity to research institutions, which suggests that proximity may also lower coordination costs and enhance information flow efficiency. Additionally, this research reveals that institutions with a STEM (science, technology, engineering, and mathematics) concentration have a stronger correlation with information sharing and entrepreneurial innovation in the manufacturing sector. Furthermore, under similar conditions, the positive effect for non-SOEs and firms with lower R&D expenditures is more critical for firms close to research institutions. We find consistent evidence for a battery of robustness checks. Overall, the study provides insightful implications that university and research center clustering is advantageous for generating and exchanging necessary knowledge.

Does intrinsic motivation or extrinsic pressure matter more? An exploratory study of small businesses going green and innovation

AbstractSmall firms may go green because of intrinsic motivation (to realise their green values) or extrinsic pressure (to satisfy the requirements of stakeholders). While the impacts of these two motivations on firms' green behaviours have been discussed in the literature, their influences on economic behaviours such as innovation remain unclear. This paper aims to investigate the relationship between going green due to intrinsic versus extrinsic motivations and their impact on firms' innovation. We examine a dataset of almost 21,000 small businesses in 39 countries, primarily less developed, from 2018 to 2020. We find that firms going green tend to be more innovative than those that do not. Also, firms going green due to extrinsic pressure are equally innovative as those that do so for intrinsic motivation. In some cases, it is even found that extrinsic pressure exerts a stronger effect on innovation than intrinsic motivation. Moreover, we examine the moderating effects of market competition on the relationship between green motivation and innovation. We find that while competition exerts no effect on the relationship between intrinsic motivation to go green and firm innovation, it strengthens the relationship between extrinsic motivation to go green and firm innovation. Our findings are robust in different empirical settings that control for endogeneity, model specifications and estimators.

Advanced manufacturing firms’ digital transformation and exploratory innovation

ABSTRACT The impact of digital transformation (DT) on exploratory innovation (EI) in advanced manufacturing firms (AMFs), particularly the influence of external knowledge search (EKS) and knowledge absorptive capacity (KAC), is a crucial research topic. Current empirical studies on the relationship between DT and EI in AMFs from a knowledge-based view (KBV) are limited. This study conducts a systematic analysis of DT’s impact on EI and its mechanisms, focusing on 254 listed firms in China and ‘Made in China 2025’ key areas. Based on KBV, it models the influence of DT on EI. The results indicate a significant positive correlation between DT and EI, with EKS, KAC, and their interactions mediating this relationship. These findings offer new insights into the KBV research pathways for DT and EI.

Environmental, social, and governance performance and corporate innovation novelty

Environmental, social, and governance (ESG) performance, along with the novelty of innovation, are significant factors in promoting sustainable development for corporations. This study employs the Heckman two-stage model to examine the impact of ESG performance on innovation novelty using a dataset comprising A-share listed companies in the Shanghai and Shenzhen Stock Exchanges from 2011 to 2020. The results indicate that enhanced ESG performance significantly fosters innovation by expanding innovation resources and mitigating agency problems. Further analysis reveals that this relationship is more pronounced under high economic policy uncertainty, a challenging information environment, elevated financing constraints, and in the context of digital transformation. This study not only expands the research on the economic implications of ESG performance for enterprise innovation behavior but also places a distinct emphasis on innovation quality rather than quantity. Additionally, this study enriches the existing literature on the factors influencing innovation novelty and extends research into the link between environmental protection and firm innovation, particularly from the perspective of stakeholder theory. Furthermore, this study holds practical significance for governments aiming to enhance ESG evaluation systems and establish guiding policies that encourage novel innovations, ultimately contributing to sustainable and high-quality development. Simultaneously, this study provides guidance to enterprises by encouraging them to embrace green development, improve social responsibility, and elevate their governance standards to promote innovation quality.

Are anti-dumping investigations against China ineffective in curbing innovation? Evidence from firms’ patent filings

ABSTRACT This paper empirically investigates the effect of anti-dumping investigations on export firm innovation performance using Chinese firm-level patent filings data and anti-dumping case from 2000 to 2013. By employing the staggered difference-in-differences strategy, our empirical evidence shows that anti-dumping investigations imposed on firms lead to an improvement in innovation rather than suppression. Further examination identifies that the trade diversion effect is a crucial mechanism through which anti-dumping investigations affect firm innovation. We find that firms are experiencing a significant increase in exports of investigated products to non-involved countries, while also expanding their export destinations and diversifying the range of exported products. Heterogeneity analysis indicates that anti-dumping charges significantly promote innovation in high-productivity firms and multi-product exporting enterprises, while financial constraints are identified as a crucial factor restricting innovation.