Firm Innovation Research Articles

The role of customer expectations and competitive pressure in shaping firm innovation decisions towards sustainability: mediating effects of innovation perception

The role of customer expectations and competitive pressure in shaping firm innovation decisions towards sustainability: mediating effects of innovation perception

One shero and/or a group of sheroes? Top executive gender and innovation in tech-based new venture

Abstract Strategic leadership theories, especially the upper-echelon perspective, emphasize the critical role of the top management team (TMT) in determining a firm’s short- and long-term performance. However, there is limited evidence on whether the gender of strategic leaders matters to firm innovation—which determines a firm’s long-term competitiveness, especially in new ventures. More specifically, at the TMT level, whether the gender of CEO, as the leader of TMT, influences the gender composition of the TMT remains unknown. Drawing on the notion of CEO-TMT interface and the opposing views on gender in leadership, this article examined the determinant role of CEO gender on the gender composition of the TMT, which in turn affects the venture’s innovation performance. The contextual role of a prominent CEO trait, i.e., CEO self-efficacy in shaping the CEO gender-TMT gender composition linkage was also tested. Findings from a sample of 300 Chinese tech-based new ventures indicate that female CEOs are more likely to appoint female TMT members, supporting the “similarity-attraction effect/homophily view” but failing to support the “queen bee syndrome theory.” Moreover, female representation in TMT is positively related to the innovation of new ventures. Finally, the positive link between female CEO and female representation in TMT is stronger when CEO self-efficacy is relatively lower.

Credit information sharing and firm innovation: Evidence from the establishment of public credit registries

AbstractLenders are reluctant to finance firms' innovation activities because such activities tend to be opaque, with a high likelihood of negative outcomes that could hamper loan repayment. We posit that public credit registries (PCRs), which play an important role in credit information sharing in many countries, can facilitate financing by reducing adverse selection and moral hazard and increasing bank competition. Using the staggered establishment of PCRs in different countries and an international firm–patent data set, we find that credit information sharing positively affects firm innovation, especially in firms that experience a larger increase in bank debt financing after the establishment of a PCR. This finding is consistent with the notion that credit information sharing promotes firm innovation by easing bank debt financing frictions. We also find a stronger effect in countries that experience a large increase in bank competition after the establishment of a PCR—consistent with increased bank competition serving as a channel through which credit information sharing facilitates bank debt financing, thereby generating a positive effect on firm innovation. The positive effect is more pronounced when the established PCR has features that promote credit information sharing. It is also more pronounced for opaque firms and firms in innovation‐intensive industries, indicating that credit information sharing helps to reduce financing frictions. Finally, we posit and find evidence that firm efficiency in transforming innovation inputs into outputs improves after the establishment of a PCR. Overall, our paper offers novel insights into how credit information sharing facilitates firm innovation.

Analyst Coverage and Corporate Innovation: Evidence from Exogenous Changes in Analyst Coverage

Using a stacked difference‐in‐differences design, we examine how exogenous reductions in analyst coverage arising from brokerage mergers and closures affect firm innovation in China. We find that firms affected by brokerage mergers or closures experience a reduction in innovation quantity, quality, investment, and efficiency. A content analysis of analyst reports reveals that exogenous analyst losses lead to reduced analyst coverage of firm innovation, and that a loss of analysts who issue innovation‐related reports drives the negative effect of analyst losses on firm innovation. In addition, we show that analyst losses have a negative effect on firms’ information environments and access to external financing, which we confirm are important determinants of firm innovation. Furthermore, these negative effects are driven by firms with weaker information environments and more severe agency conflicts, which experience a greater deterioration of their information environment and access to external financing following the analyst losses. Finally, we show that analyst losses do indeed lead to negative economic consequences, as evidenced by reduced sales growth, market share growth, and firm value, suggesting that innovation outputs are economically valuable in China. Overall, our evidence suggests that in the context of emerging markets, analysts can play a crucial role in shaping firm innovation by covering firms’ innovation activities and thereby reducing information asymmetry and mitigating agency conflicts with respect to innovation.

The greening power of networks: Spillover effect of environmental penalties in director networks.

Using data from a sample of Chinese firms, this study examines the spillover effects of environmental regulation within director networks. Our findings suggest that environmental penalties imposed on director-interlocked firms increases the green innovation of the target firms. These results remain robust after a series of endogeneity and robustness tests. The effect is moderated by internal monitoring mechanisms and external stakeholder concerns. In addition, the spillover effect is more pronounced for firms that are central within the director network, have a greater proportion of directors with environmental backgrounds, or are located in regions with stronger legal environments. Further, this effect is predominantly observed within independent director networks, where independent directors play a crucial role through active board participation. Our study contributes to the literature on the determinants of green innovation and offers valuable insights for policymakers seeking to improve environmental governance and promote sustainable development.

Do venture capital-driven top management changes enhance corporate innovation in private firms?

Using hand-collected data from Form Ds on executives in venture capital (VC)-backed private firms, I show that VC-driven top management changes lead to a significantly greater quantity and quality of innovation, which potentially occurs through new management teams hiring more and higher quality inventors. My evidence demonstrates that both founder replacements and non-founder management changes are associated with enhanced innovation. Further, adding top managers with general managerial skills enhances innovation, whereas changing managers with a prior technical background does not. Finally, top management changes lead to the adoption of an exploitative (rather than explorative) innovation search strategy by private firms.

How perceived stakeholder orientations affect consumers’ perceived firm innovativeness across nations

How perceived stakeholder orientations affect consumers’ perceived firm innovativeness across nations

Unveiling the nexus between board quality, firm innovation and climate risk disclosure: a study of Indian companies

Unveiling the nexus between board quality, firm innovation and climate risk disclosure: a study of Indian companies

Valuation Driven Innovation

Abstract This paper examines whether and how market valuation influences firm innovation, using an ex ante valuation measure that filters firm size and growth prospects from tangible investment. Specifically, by utilizing the National Bureau of Economic Research (NBER) patent database, I find that firms with high market valuations generate more innovative outputs, as measured by the number of patents and patent citations. Causality is established using mutual fund flows as an exogenous shock, demonstrating a strong effect of market valuation on firm innovation. Consistent with the idea that managers take advantage of irrationally low discount rates by issuing equity and investing the proceeds, these results are more pronounced among firms with high financial constraints and overvaluation. The sensitivity of innovative output to market valuation varies with equity market timing and sentiment, but is not affected by whether or not firms are issuing equity.

Intermediate input import policy uncertainty and firm innovation: evidence from China

Innovation is crucial for driving economic growth. This paper conducts a comprehensive analysis of the effect of intermediate input import policy uncertainty (IIIPU) on firm innovation. Specifically, leveraging China’s entry into the WTO as a quasi-natural experiment, this study utilizes a difference-in-differences strategy to analyze the intermediate input import policy uncertainty on the innovative activities of Chinese manufacturing firms. The findings reveal that a reduction in intermediate input import policy uncertainty (IIIPU) significantly hampers firm innovation activities. This negative impact persists even after undergoing a series of tests on identification assumptions and robustness checks, and it intensifies annually after China’s accession to the WTO. In addition, the reduction in IIIPU has a more pronounced effect on high-productivity firms, foreign-invested enterprises, and utility model patents.

Enhancing innovation through ESG practices: the superior impact on family businesses

PurposeThis work contributes to the debate on the link between environmental, social and governance (ESG) criteria and firm innovation, incorporating ownership structure as a moderating variable.Design/methodology/approachThis research uses ordinary least squares (OLS) regression to analyse the impact of ESG criteria on innovation, considering firm ownership as a catalyst that strengthens the effect of environmental and social practices on innovative performance.FindingsFamily-owned firms, with their unique characteristics like long-term orientation and commitment to family values, strengthen the relationship between environmental and social practices and innovation performance. This suggests that such firms are better positioned to leverage their corporate social responsibility (CSR) commitments and activities.Practical implicationsThe findings offer valuable insights for decision-making in organizations, particularly family firms focused on innovation and sustainability. The research shows that investing in sustainability practices not only ensures ESG compliance but also significantly fosters innovation.Originality/valueThis study contributes to the debate regarding the relationship between ESG criteria and firm innovative performance. It highlights how the implementation of ESG practices influences innovation, and particularly how firm ownership further enhances the relationship between environmental and social practices and firm innovative performance.

Unveiling the nexus between ESG performance, climate policy uncertainty and corporate innovation: evidence from textual analysis

PurposeThis paper aims to examine the relationship between environmental, social and governance (ESG) performance and text-based corporate innovation based on a sample of India’s ESG-disclosed companies from financial year 2011–2012 to 2021–2022. Further, it endeavors to investigate the moderating role of heightened climate policy uncertainty (CPU) in this relationship.Design/methodology/approachTo verify these hypotheses, the authors first construct a corporate innovation index for India using a sophisticated natural language processing model on each firm-year’s management discussion and analysis reports. Next, the authors use a panel fixed effects model to examine how ESG performance impacts corporate innovation and its moderating and mediating components.FindingsEmpirical evidence suggests higher ESG performance bolsters text-based corporate innovation. After addressing endogeneity issues with the system GMM estimator and two-stage least square IV, incorporating additional control variables and using alternative innovation measurement, the baseline results remain unchanged. Next, the authors find this link is mediated by reducing information asymmetry, financial constraints and managerial myopia. The authors also observe that increased CPU favorably moderates the ESG-innovation nexus. Additionally, the heterogeneity research shows that ESG only positively impacts innovation in specific industries and firms in their growth and mature life cycle phases.Practical implicationsThe results demonstrate that sustainable and ethical business practices can foster corporate innovation. Thus, this study may provide valuable insight for investors, managers and policymakers.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine the relationship between ESG performance and text-based corporate innovation using a machine learning model.

Soft HRM Practices Fostering Service Innovations and Performance in Hospitality Firms

Soft HRM Practices Fostering Service Innovations and Performance in Hospitality Firms

What incentivises innovative firms to avoid taxes?

What incentivises innovative firms to avoid taxes?

Which dynamic capabilities lead to high business model innovation? Configurational evidence from China

ABSTRACT Dynamic capabilities are a positive antecedent of high business model innovation. However, current research has ignored the impact of dynamic capabilities’ dimensions. To address this theoretical gap, we examined the combined effects of dynamic capabilities’ dimensions and the external environment on business model innovation using data from Chinese new ventures and incumbent firms. The results of fuzzy set qualitative comparative analysis revealed that sensing capacity alone cannot drive business model innovation. Different solutions exist to facilitate business model innovation for new ventures and incumbent firms. Finally, the theoretical contributions and implications are discussed.

Relationship Between Intellectual Capital, Executive Motivation, and Corporate Innovation Level —Evidence from Chinese Listed Manufacturing Companies

In the knowledge economy era, innovation is the main engine that drives high-quality development of the manufacturing industry. Exploring the mechanism behind intellectual capital, its constituent elements that stimulate innovation within manufacturing enterprises, and the influence of executive motivation emerges as a crucial imperative, considering intellectual capital as the sum of intangible assets of enterprises. Unraveling this intricate interplay becomes essential in comprehending the driving forces behind innovation in this sector. Based on this, the present study analyzed the relationship between intellectual capital, executive incentives, and corporate innovation level using a sample of manufacturing companies listed in Shanghai and Shenzhen A-shares from 2012–2021. The empirical findings demonstrate the positive impact of human capital, structural capital, and relational capital on the innovation levels of manufacturing firms. Moreover, executive compensation incentives and equity incentives also contribute positively to enhancing firm innovation. Notably, these executive incentives play a vital moderating role in strengthening the relationship between intellectual capital dimensions and firm innovation. Intellectual capital dimensions have a stronger impact on innovation levels in non-state-owned manufacturing enterprises than in their state-owned counterparts. Moreover, the positive influence of intellectual capital on innovation is more significant in highly marketized regions compared to regions with lower levels of marketization.

Supply Chain Ambidexterity and Supply Chain Performance: The Moderating Role of Firm Innovation. A Case Study of Some Selected Manufacturing Firms in The Greater Accra Region of Ghana

This study explored the relationship between supply chain ambidexterity, firm innovation, and supply chain performance among 161 manufacturing firms in Ghana. The main focus was to understand how firm innovation affects the link between ambidexterity and performance. Key findings include: (1) supply chain ambidexterity alone did not significantly impact performance, contradicting assumptions; (2) firm innovation capabilities, surprisingly, had a negative effect on performance, suggesting a need for better innovation alignment; and (3) innovation positively moderated the relationship between ambidexterity and performance, showing that combining innovation with ambidexterity can improve outcomes. Recommendations for managers emphasize the importance of aligning innovation strategies with supply chain goals and balancing exploration and exploitation activities. Future research should consider long-term studies, multi-region comparisons, and diverse data sources to increase validity. Overall, the study refines the understanding of how innovation and ambidexterity interact to enhance supply chain performance.

Leveraging a Robust Innovation Culture: Building Internationalisation-Based Open Innovation in Australian Firms

Leveraging a Robust Innovation Culture: Building Internationalisation-Based Open Innovation in Australian Firms

How sustainability committees moderate the link between ESG performance and environmental innovation in European firms?

PurposeThis paper investigates the moderating role of sustainability committees in the relationship between environmental, social and governance (ESG) performance and environmental innovation within European nonfinancial firms.Design/methodology/approachThe study analyzes data from 691 nonfinancial sector firms operating within EU states from 2013 to 2022. It employs regression analysis to examine the correlation between ESG performance and environmental innovation, considering the moderating effect of sustainability committees.FindingsThe research reveals a significant and positive correlation between ESG performance and environmental innovation. Moreover, it demonstrates that sustainability committees play a positive moderating role in this relationship, indicating their importance in fostering environmental innovation within organizations.Research limitations/implicationsThe study is limited to European nonfinancial companies, potentially limiting the generalizability of findings. Additionally, the research focuses on the moderating role of sustainability committees, leaving room for further exploration of other governance mechanisms.Practical implicationsThe findings suggest that implementing an ESG performance framework and establishing dedicated sustainability oversight mechanisms, such as sustainability committees, can enhance environmental innovation within organizations. This insight is valuable for strategic decision-making aimed at advancing both sustainability and innovation agendas.Originality/valueThis study addresses a gap in the literature by exploring the moderating effect of sustainability committees on the link between ESG performance and environmental innovation from various theoretical viewpoints. It contributes to the understanding of mechanisms that enhance environmental innovation within companies and provides practical implications for corporate reporting accuracy and sustainability initiatives.

How Social Movements Catalyze Firm Innovation

How Social Movements Catalyze Firm Innovation