Firm Innovation Research Articles

How does audit quality affect firm innovation? Evidence from China

AbstractExisting research based on the US setting suggests that high‐quality audits impede firm innovation by inducing managerial myopia that leads managers to sacrifice innovative activities. We extend this literature by examining the impact of audit quality on firm innovation in a major emerging market, China. Given the weak institutional environments in China, we posit that increases in audit quality enhance firm innovation by facilitating firms’ external financing abilities and promoting managers’ innovation efforts. Consistent with our predictions, we find that increased audit quality due to “switching” to BigN auditors after auditor mergers significantly improves firms’ innovation quantity and quality. We further find that increases in audit quality impact firm innovation by increasing external financing and motivating both internal and external investment in innovation. Overall, our results indicate that audit quality has a positive governance effect on firms’ real decisions in a major economy with weak legal environments.

Public data openness and firm innovation strategies

ABSTRACT This paper investigates the impact of urban-level public data open platforms on corporate innovation strategies by using them as a quasi-natural experiment and employing the difference-in-differences (DID) method. The findings indicate that public data openness significantly promotes incremental innovation rather than breakthrough innovation, with economic and public service data playing a particularly influential role. Moreover, the preference for incremental innovation by enterprises reduces innovation quality, but this issue can be mitigated by introducing industry competition and strengthening intellectual property protection.

Integrating CSR and Business Strategy into Social Innovation: Insights from Taiwan’s Cultural and Creative Industries

ABSTRACT Design/methodology/approach This study’s contributions lie in the use of multiple methods and data collected from developing industries from cultural and creative industries in Taiwan. Purpose This study aims not only to emphasize the importance of corporate social responsibility (CSR) for businesses but also to examine how CSR activities affect communities while ensuring that the firm meets its necessary social performance standards. Findings The results show the multiple mediation mechanism of business strategy, multiple moderation effects of marketing orientation in the initial stage, and the role of social entrepreneurial self-efficacy in the final stage of improving the social innovation. Practical implications This study considers how CSR could affect the results of business strategy, whereby cultural and creative firms should embrace social responsibility behavior altruistically rather than merely seeking economic benefits but focus on social innovation to improve their own competitive advantage. Originality/value This study argues that the relationship among CSR, business competitive strategy and firm innovation performance is more complex than previous business management studies have revealed.

Human Resource Management Practices and Firm Innovation: An Empirical Study in Sri Lankan SMEs

In the modern business world, organisations are confronting a severe competitive and unceasingly changing condition. In this context, innovation has gained significant popularity in management and entrepreneurship literature as vital in reaping competitive advantage. Thus, organisational practitioners are in the quest to better encourage and organise innovation within their firms to warrant sustainable competitive advantage. However, how to promote innovation within organisations remains obscure and paradoxical. The past literature shows that human resource management practices are the antecedents of firm innovation. Therefore, studies are investigating the role of human resource management in facilitating firm innovation. Nevertheless, empirical evidence remains inconsistent, and theory is fragmented. Notably, the link between human resource management and innovation in Sri Lanka echoes several unresolved aspects. Since scant empirical research has addressed those relationships in developing country contexts, this study explicitly investigates the relationship between human resource management practices and firm innovation in Sri Lankan SMEs. Data were marshalled through a self-reported questionnaire with 214 Sri Lankan SMEs. As a caveat, the reliability and validity of the variables were confirmed. The hypotheses were tested with statistical software, PLS-SEM (Partial Least Squares Structural Equation Modeling). The study revealed that recruitment and selection, training and development, and performance appraisal significantly impact firm innovation. However, compensation and reward systems positively impact product innovation, not process innovation, and this study found a negative impact of compensation and reward systems on administrative innovation. The study contributed to the extant human resource management and innovation literature in many ways discussed at the end of the paper. On an equal footing, practical implications for HR managers, practitioners and employees were lucidly discussed. The present becomes a springboard for future scholarly works.

The Effect of Innovation on Financial Performance: A Research in BIST Manufacturing Sector

The study aims to research the effect of firms innovation activities on financial performance. With in the scope, 2018-2022 data of 80 firms in the “BIST Manufacturing Sector” were analyzed using “panel data analysis” methods. As a consequences of the analysis, it was noted that the R&D expenses of the firms did not have a statistically significant effect on financial performance. However, while intangible assets have a negative impact on return on assets, it has been found to have a positive impact on return on equity. Within this scope, it is thought that investments and expenses made in innovation activities will have serious effects on financial performance in the long term.

Exploring fiscal incentives, financial constraints, and firm innovation performance: A multidimensional correlation analysis and mechanism exploration

The article study selects the panel data of 3407 A-share listed companies between 2010 and 2022, aiming at exploring the impact of fiscal incentives on firms' innovation performance and revealing the mediating role of financing constraints. The empirical results show that fiscal incentives have a significant positive impact on both corporate innovation performance and financing constraints; meanwhile, corporate financing constraints are found to play a fully intermediary role between fiscal incentives and corporate innovation performance. This research result is of great significance to both enterprises and governments. Enterprises can take the initiative to utilize fiscal incentives to improve innovation performance, strengthen financing ability, and then promote enterprise development. The government can take fiscal incentives and other measures to support enterprise innovation and promote the healthy development of the national economy. At the same time, governments should also explore more effective financing mechanisms to provide enterprises with a favorable financing environment to further promote enterprise development and innovation capacity.

How CEO transformational leadership promotes firm innovation: mediating role of collective task self-efficacy

PurposeInnovative capabilities are essential for the survival and development of an organization. Previous studies have found a positive relationship between CEO transformational leadership (CEOTFL) and firm innovation. However, limited studies have endeavored to investigate the relationship between CEOTFL and firm innovation through the cognition and attitudes of the ordinary employees, despite their significant role in corporate innovation. Existing TFL literature has predominantly concentrated on “the close relationships” between leaders and their immediate subordinates, leaving the remote influence of CEOTFL on ordinary employees under-researched. Therefore, the current study aims to explain the relationship between CEOTFL and firm innovation from a micro-level perspective.Design/methodology/approachMultilevel and multi-sourced data from 1,627 employees across 145 firms was used to test the hypotheses in this study.FindingsThe results indicate that CEOTFL can enhance firm innovation by enhancing the collective task self-efficacy of regular employees. Moreover, this effect is not observed when employees are exposed to a low level of work–life balance practices.Practical implicationsThe findings suggest that CEOs can perform increased TFL to promote firm innovation. It is recommended that CEOs demonstrate their TFL not only to their direct subordinates but also to regular employees using various methods, such as participating in corporate activities with employees, delivering public speeches and sending emails to employees. Meanwhile, the HRM system should consistently align with the CEO’s leadership approach within the organization.Social implicationsThis study strengthens the importance of ordinary employees and their contribution to firm innovation.Originality/valueThe present study contributes to the literature on the micro-foundations of the relationship between CEOTFL and firm innovation by considering ordinary employee reactions as a mediator. Furthermore, this study enriches the CEOTFL literature by investigating the distant influence of CEOTFL on rank-and-file employees through the lens of social cognitive theory. Additionally, the authors expand cue consistency theory to the realms of CEO leadership and HRM literature by integrating CEOTFL and work–life balance practices into a unified model. The findings reveal the importance of coordination between CEO leadership and HRM systems within an organization. The inclusion of Chinese sample data in this study augments the cultural diversity of the sample within the CEOTFL literature.

The Economic Policy Uncertainty on Firms Behavior

The study examines how economic policy uncertainty could affect firm behavior. It discusses how changes in economic policies can affect investment decisions, capital expenditure, innovation, and green behavior of firms. This topic focuses on analyzing the relationship between corporate financial decisions and consumer spending under policy uncertainty. It also explores the relationship between policy uncertainty and firms' overseas investments, environmental performance, governance practices, tax avoidance strategies, and cash-effective tax rates. The findings reveal the importance of cash holdings in alleviating the effects of policy uncertainty on firm activities and highlight the relationship between policy uncertainty and firms' carbon emission intensity. Overall, the study provides insights into the various aspects of corporate decision-making affected by economic policy uncertainty.

Design and evaluation of a blockchain‐based system for increasing customer engagement in circular economy

AbstractThe purpose of this study is to design, develop and evaluate a blockchain platform in the field of circular economy (CE). To achieve this aim, the research demonstrates the feasibility of designing a decentralised architecture and prototyping a distributed system to increase customer engagement in the transition toward CE. Building on previous research and leveraging on the design science research approach, the paper identifies the technical and managerial issues that must be addressed to adopt blockchain as an enabling technology in the CE domain. More in details, starting with the identification of circular sharing economy (CSE) processes, a conceptual framework was designed to evaluate how blockchain implementation has the potential to enhance the role of customers involved in CSE processes. As for the practical implications, the suggested conceptual framework reduces the knowledge gap between blockchain developers and corporate social responsibility specialists. To bridge the gap, it identifies future directions and practical guidelines for designing and implementing blockchain to support the digital and sustainable innovation of more circular firms and supply chains.

Innovation and Commercialization Characteristics of Techno-Business Firms in Uganda: An Overview of Firm Processes, Strategies, and Challenges

The role of techno-business firms in shaping the innovation and commercialization processes in Uganda has been the focus of extensive research and analysis. The objective of this study is to provide a comprehensive understanding of the contributions of techno-business firms to the innovation and commercialization landscape in Uganda. To accomplish this, qualitative and quantitative research methods were employed using interviews and observational approaches. These methods involve gathering evidence, including observations and interviews with techno-business entrepreneurs. By examining the various factors that influence the growth of these firms, such as their approaches to Research and Development (R&D), marketing, and partnerships, this study sheds light on the ways in which techno-business firms drive innovation and commercialization in Uganda. This study indicates that R&D and Intellectual Property (IP) protection are vital components of firms’ innovation and commercialization initiatives. The study underscores the importance of grants or subsidies as the primary financing mechanism for firm activities. The study highlights that product or innovation development depends on collaborative agreements, adjustments to current products, and internal idea generation. This study reveals innovation and commercialization disparities and proposes remedies to bridge these gaps. This ultimately fosters transformative growth by enhancing industrial production and strengthening the connections between techno-business firms and the industrial sector

Digital Product Innovation Within Family Firms: A Construal Level Perspective

Digital product innovation (DPI) is critical for the survival of firms, especially those operating in traditional industrial-age industries. While research has started to investigate digital innovation in family firms (FFs) considering them as a monolithic group, we still lack a more nuanced perspective that considers heterogeneity among FFs with respect to DPI and what drives such variance. Drawing on construal level theory to explain the risk behavior and goal time horizon of FF owner-managers, we propose and find that the presence of later family generations in control positively influences DPI in FFs, while the presence of a family CEO is detrimental to DPI. Furthermore, we propose that these relationships are moderated by the size of the top management team (TMT), finding that a larger TMT weakens the positive relationship between later generations in control and DPI. We base our analysis on a longitudinal sample of 103 FFs in the automotive, industrial engineering, and pharmaceutical sectors observed from 2013 to 2020. This first empirical study applying construal level theory to the family business literature has important implications for the FF digital innovation literature and for FF owner-managers interested in achieving DPI.

Impact of boundary-spanning search on firm innovation performance: a strategic knowledge integration perspective

Purpose This study aims to explore the mechanism of boundary-spanning search on firm’s innovation performance under environmental dynamics from the perspective of strategic knowledge integration. Design/methodology/approach A survey was conducted among Chinese firm managers and R&D personnel, resulting in the collection of 315 valid samples. Hierarchical regression analysis was mainly adopted to demonstrate the hypothesized relationships, while the Sobel test and bootstrap method were used to further validate the mediating effects. Findings The results demonstrate that boundary-spanning search in different dimensions is a critical factor in the improvement of firm innovation performance (FIP). Two types of strategic knowledge integration are the main factors causing FIP and mediate the influence of boundary-spanning search on FIP. Furthermore, environmental dynamics moderate the relationship among boundary-spanning search, strategic knowledge integration and FIP. Practical implications Managers need to strengthen the boundary-spanning search for market and technical knowledge, which will promote firm innovative performance. Managers also need to implement strategic knowledge integration, which specifically includes using planned strategic knowledge integration to compensate for knowledge deficiencies, thereby achieving predetermined objectives; and using emergent strategic knowledge integration to update their understanding of internal and external environments, and to reset strategic objectives. In dynamic environments, managers should emphasize strategic knowledge management activities more. Originality/value From a strategic management perspective, this study categorizes strategic knowledge integration into planned and emergent forms. By applying the logic of knowledge acquisition, integration and creation, it explores how boundary-spanning search affects FIP through strategic knowledge integration as the intermediary and the boundary conditions of environmental dynamics. This not only provides a deeper understanding of the nature and effects of boundary-spanning research but also enhances the theory of strategic knowledge management.

How to configure the supply chain to stimulate firm innovation performance?

Supply chain characteristics are an important driving force for innovation at the focal firm. Previous research has separately examined the impact of structural, relational, and capability dimensions of the supply chain on firm innovation. Relying on the structure-relationship-capability framework, this study explores the configurational impact of geographical distance, business concentration, and partner innovation of both the supplier-base and the customer-base on firm innovation. Necessary causality analysis (NCA) and fuzzy-set qualitative comparative analysis (fsQCA) are employed. Based on a dataset of 123 Chinese listed firms in high-tech manufacturing sectors, we provide novel insights on the antecedent configurations of the partner characteristics in both ends of supply chains for facilitating firm innovation. Our findings indicate that there are no necessary conditions for high firm innovation performance. We identify three distinct paths - namely, innovation-driven, customer-dominated, and relationship-driven configurations - that consistently lead to high firm innovation performance. From a configurational perspective, this research contributes to the innovation and supply chain literature and provides practical implications for managers to facilitate firm innovation.

Intensified law enforcement and firm innovation: Evidence from China's antitrust consolidation

This paper examines the significant transformation in China's antitrust regulatory framework following the consolidation of its three primary antitrust agencies the Ministry of Commerce (MOFCOM), the National Development and Reform Commission (NDRC), and the State Administration for Industry & Commerce (SAIC) into the State Administration for Market Supervision (SAMR). Utilizing data from publicly listed firms across various industries, we analyze how firms in highly concentrated industries have adapted to this consolidation, by increasing the R&D investment, patent filing, and total factor productivity (TFP). Our mechanism channel indicates that stricter enforcement actions and fines by SAMR have spurred competition and innovation, with effects that are comparably significant across both state-owned enterprises (SOEs) and private firms. The paper contributes to the literature by providing an empirical assessment of the effects of this major restructuring within China's Anti-Monopoly Law (AML) enforcement. Our findings shed light on the broader implications of regulatory consolidations on firm innovation, offering insights into the efficacy of such transformations in antitrust policy.

Influence of educational composition on firm innovation and performance

ABSTRACT Despite a strong focus on innovation from both politicians and managers, our current understanding of the relationship between managers’ education level and the educational composition of the workforce in terms of innovation and their joint association with performance remains limited. For example, while most studies include workforce quality as a control, and recognize its importance, there is still little knowledge about how it influences the innovation process. The data and estimation framework used in this study enable for a detailed analysis of the importance of both managers’ and workers’ skill intensity and workers’ skill diversity throughout the sequential innovation process that transforms ideas into valuable innovation in three stages. In addition, the availability of panel data allows us to account for various econometric issues, such as sample selection bias, reverse causality, simultaneity, and measurement errors. We conclude that educated managers, together with a balanced workforce across education length and field enhance both innovation and performance. Even more interestingly, we show that the educational level of managers influences the innovation process primarily through the recruitment of more educated workers with diverse educations. And the importance of including the indirect effect of educational composition through R&D decisions on the likelihood of innovation.

Do government environmental target constraints break the political resource curse? --A study on political connections and firm green innovation

This study combines government environmental target data (2003–2015) with green innovation among listed firms of China. After investigating the relationship between political connections and firm green innovation, we focus on whether government environmental target constraints can break the political resource curse and enhance green innovation. The findings suggest the existence of a political resource curse in firm green innovation. However, government environmental target constraints effectively mitigate this curse, increasing the quantity of green innovation in firms with political connections but at the expense of a decline in quality of green innovation. We further conduct a robustness analysis using data from 2003 to 2021, and the research findings remain consistent. Mechanism analysis indicates that government environmental target constraints effectively boost the quantity of green innovation in politically connected firms by reducing rent-seeking costs and increasing R&D subsidies. Simultaneously, government environmental target constraints amplify financial constraints, subsequently squeezing high-quality inputs for green innovation and resulting in a decline in quality. Furthermore, the intensity of government environmental regulation influences the relationship between political connections and green innovation in a non-linear way. When the intensity of government environmental regulation is high, it motivates politically connected firms to increase the quantity of green innovation but at the cost of reduced quality. Heterogeneity analysis also reveals diverse impacts of government environmental target constraints on green innovation in firms with political connections, considering factors such as levels and types of political connections, green innovation, social attention, industries, regional economic growth pressure, and market conditions.

Artificial Intelligence and Technological Innovation: Evidence from China’s Strategic Emerging Industries

Artificial intelligence (AI) is the driving force for the leapfrog development of science and technology, the optimization and upgrading of industry, as well as the overall leap in productivity. Using panel data of strategic emerging firms in Chinese A-Share Listed companies from 2012 to 2022, this study empirically examines the impact of AI on technological innovation through a two-way fixed-effects model. The study discovered that technological innovation capability can be greatly enhanced by the degree of AI present in strategic emerging industry businesses. This conclusion remains valid following a series of robustness tests. The mechanism study demonstrates how the degree of AI increases businesses’ capacity for technological innovation by lowering funding constraints and boosting R&D investment. According to heterogeneity analysis, AI has varying empowering effects on different industries within strategic emerging industries. Its strongest empowering effect is observed in the western region, with the central and eastern regions seeing the weakest effects. Additionally, the promotion effect of AI is greater for state-owned enterprises than for non-state-owned enterprises. To better play the role of AI in encouraging the technical innovation of firms in strategic emerging industries, it is required to establish dedicated funds, create an AI technology innovation platform, and develop differentiated regulations.

Synergistic governance and innovation: the positive effect of cross-holding partners

ABSTRACT Innovation within enterprises stands as a crucial component of effective enterprise management, serving as the primary determinant influencing the company's developmental trajectory, scale, and pace. The primary objective of this study is to analyze the effects of cross-holding partnerships on firms’ innovation performance, as well as the interplay between internal cross-holdings and innovation results. By examining data from 2011 to 2021 of A-share listed companies, this paper empirically analyzes the impact of cross-holding shareholders on firm innovation performance. According to the study, cross-holding shareholders positively impact enterprise innovation performance, indicating a synergistic governance effect. Besides, the study finds that both information transparency and internal control play significant mediating roles in enhancing the relationship between cross-holding shareholders and enterprise innovation performance. The study's novelty lies in its in-depth exploration of cross-holding intricacies and their specific influence on innovation. By dissecting various cross-holding scenarios, the research contributes valuable insights that refine the understanding of how shareholder dynamics can shape innovation within enterprises. Based on the findings suggestions for practitioners include a nuanced approach to cross-holding arrangements, emphasizing the need for strategic alignment between shareholders and innovation goals. Additionally, developing transparency and communication among cross-holding entities may mitigate potential negative effects on innovation.

The Effect of Trade Policy Uncertainty on Green Technology Innovation: Evidence from China’s Enterprises

Promoting green technology innovation is essential for sustainable development and the transition to a low-carbon economy. Using data from listed manufacturing companies in China from 2000 to 2020, this paper takes the establishment of permanent normal trade relations with the United States after China’s accession to the WTO as a quasi-natural experiment and uses the difference-in-differences method to study the impact of the decline in trade policy uncertainty on firms’ green technology innovation. The results show the following: (1) Reduced trade policy uncertainty significantly enhances green technology innovation in firms. (2) Further research finds that the decline in trade policy uncertainty mainly promotes the level of the green technology innovation of firms by alleviating financing constraints faced by firms and intensifying market competition. (3) A heterogeneity analysis reveals that the impact is more pronounced in firms with lower capital intensity, higher growth, export firms, and firms exporting to the United States. This study offers micro-level empirical evidence from China on the economic outcomes of external trade policy changes from the perspective of firms’ green technology innovation and provides insights into how the government should respond to the risks of external trade frictions and improve firms’ sustainable development in the future.

Does common institutional ownership promote ambidextrous innovation in firms?

Does common institutional ownership promote ambidextrous innovation in firms?