Regional Institutional Environment Research Articles

Reform of Budget Performance Management and Local Financial Pressure in China

As the situation of tight fiscal balance among local governments in China continues to intensify, research on how to release local fiscal pressure has attracted much attention. At the national level, the reform of budget performance management has significantly reduced the financial pressure on local governments; Mechanism analysis shows that reform can alleviate local fiscal pressure through two channels: improving fiscal expenditure performance and optimizing regional institutional environment; The analysis of regional heterogeneity shows that the reform only reduced the local fiscal pressure in the eastern region, while the fiscal pressure in non eastern regions did not decrease but instead increased. Finally, this article proposes suggestions for addressing the issues of unbalanced and insufficient reforms, which provide policy insights for China's subsequent efforts to improve the quality and efficiency of budget performance management.

Does government transparency promote firm innovation? Evidence from China

ABSTRACT This study investigates the relationship between government transparency and firm innovation, exploring the mechanisms through which government transparency influences firm innovation using Chinese provincial-level and firm-level data from 2013 to 2020. The findings reveal a significant positive association between government transparency and both firm innovation input and output. Mechanism analysis suggests that government transparency enhances firm innovation by fostering improvements in the regional institutional environment. Furthermore, the study identifies heterogeneity in the effects, indicating that state-owned enterprises (SOEs) and high-tech firms derive greater benefits from government transparency. This research contributes to the existing literature by addressing the role of government transparency in promoting firm innovation and offers valuable insights for practical applications.

Regional institutional environment and R&D performance: Evidence from marketization index of China’s provinces and panel data of high-tech manufacturing firms

Purpose How does the regional institutional environment of China’s transitional economy influence the relationship between a firm’s R&D investment intensity and innovation performance? Based on the resource-based view and institution-based view, an empirical study was executed to identify the moderating effects of institutional environment variables from the Marketization Index of China’s Provinces: National Economic Research Institute (NERI) Report on the relationship between a firm’s R&D investment intensity and innovation performance. This paper aims to study how effectively improve the impact of R&D investment intensity on innovation performance under the influence of the institutional environment. Design/methodology/approach Against the background of China’s transitional economy, the authors present empirical evidence from panel data covering 374 Chinese A-share listed high-tech manufacturing firms on the Shanghai and Shenzhen Stock Exchange to examine the relationship between R&D investment intensity and innovation performance. Findings Empirical results illustrate the following: The R&D investment intensity and innovation performance displayed an inverse U-shaped relationship, and R&D investment intensity had a lagged effect on R&D output according to the uncertainty and industrialization period of R&D activities. The level of financial market development can intensify the effects of R&D investment intensity on innovation performance. The degree of government intervention weakens the effect of R&D investment intensity on innovation performance. Originality/value Based on the background of China’s institutional environment during the transition period, combined with previous research and the Marketization Index of China’s Provinces: NERI Report, selecting financial market development, government intervention level and legalization level as moderating variables to study how effectively improve the impact of R&D investment intensity on innovation performance under the influence of the institutional environment. Due to the different ownership of firms during the transition period, the appropriate impact of the institutional environment on the relationship between R&D investment intensity and innovation performance will vary. Moreover, the level of legalization would impact on innovation insignificantly.

The crowding-out effect of zombie companies on fixed asset investment: Evidence from China

This paper attempts to investigate the relationship between zombie companies and normal companies' fixed asset investment. Our empirical research finds that zombies will crowd out the fixed asset investment of normal companies, and this result remains stable under many robustness tests. Heterogeneity analysis reveals that the crowding-out effect mainly exists in non-SOEs, companies with small tax contributions, and companies in light industries, while SOEs, companies with large tax contributions, and heavy industrial sectors are unaffected by zombies. It's also shown that zombie companies crowd out fixed asset investment by increasing financing constraints, raising financing costs and destroying the industry's competitive environment. We further find that improving the regional institutional environment can alleviate zombies' crowding-out effect. Overall, our paper enriches the research on zombie companies' negative impact on normal companies and emphasizes the importance of strengthening the construction of the institutional environment.

ХАРАКТЕРИСТИКИ ТА ВЛАСТИВОСТІ ІНСТИТУЦІЙНОГО СЕРЕДОВИЩА ІННОВАЦІЙНОГО РОЗВИТКУ ПІДПРИЄМСТВ РЕГІОНУ

It is proven that regional innovation systems can be studied as a set of institutions whose activities are aimed at creating and spreading knowledge, technologies and innovations. On the one hand, regional innovation systems are considered as a set of organizations and enterprises that carry out activities for the creation, commercialization, promotion and diffusion of innovations, as a set of infrastructural elements that ensure innovation processes. On the other hand, regional innovation systems can be studied as a set of institutions whose activities are aimed at creating and spreading knowledge, technologies and innovations. Both approaches are related to the presence in the region of a number of factors of socio-economic development and are based on the use of the advantages of localized centers of knowledge generation, agglomeration development processes, as well as specific technological trajectories of regional development. The regional innovation system is considered as a dynamic and self-organized system. It was determined that researchers most often include density and hierarchical structure among the main characteristics of the institutional environment as a whole and the regional institutional environment. The characteristics of the institutional environment are given (multilevel, duality, component incompleteness, fragmentation, dynamism, dissipativeness). The most important functions of the rules are to provide conditions for comfortable interaction of subjects and to reduce the level of uncertainty in the decision-making situation. Reducing the level of uncertainty is a key condition for ensuring the coordinated actions of participants in innovative activities. Accordingly, the institutional environment should also ensure a reduction in the level of uncertainty in the everyday interaction of subjects of innovative activity. The current stage in our country can be called a digital singularity or the beginning of a new digital era, which indicates the need to transform the institutional environment. The digital economy is developing at an incredible speed, attracting new participants who create and develop new technologies. The digital economy institute that is being formed produces new conditions of the institutional environment, which makes it possible to highlight its new characteristics^ globality, isotropicity, boundlessness, expansion with positive acceleration, contactlessness. It has been proven that the transition to a new technological system will cause huge changes in the industrial and social spheres. The expansion of the telecommunications infrastructure, cognitive computing, expert systems, and big data technologies make it possible to model economic and social processes and directly influence them.

ТРАНСФОРМАЦІЯ ІНСТИТУЦІОНАЛЬНОГО СЕРЕДОВИЩА ЗАДЛЯ ЗАБЕЗПЕЧЕННЯ КОНКУРЕНТОСПРОМОЖНОСТІ РЕГІОНУ

The article explores the prospects for transforming the institutional environment to ensure the competitiveness of the region. The digital economy is seen as a means of enhancing economic growth and increasing the competitiveness of regions and the country as a whole. It is concluded that at the national level it is important to adopt and strengthen the relevant institutional framework for digitalization. The organizational and economic mechanism for managing innovation activity in the region is considered as a system of interrelated elements that ensure the achievement of the goals of innovative development in the context of digitalization of the region's economy. It is presented in the work as a set of organizational and economic methods, methods, tools for influencing innovative activity in the region, based on a systematic approach to the large-scale introduction of digital technologies in regional management processes and technological processes of high-tech and knowledge-intensive enterprises in the region in order to increase the competitiveness of regional business and mass use digital technologies. Institutional transformation is considered in the work not just as a change, but as a transformation that affects the essential quality of the institution. The creation of a new institution in specific socio-economic conditions is considered as a multi-level process, at the highest level of which both conscious mental processes and the personal, collective unconscious are affected, as a result of the onset of a certain kind of events, information impulses are formed that reflect the need of a significant part of society in some institution. The proposed model for the transformation of the regional institutional environment contains such a specific mechanism as the mechanism of convergence, the application of which in practice will ensure the reduction of inter-regional and intra-regional inequality through the mechanisms of stimulating technological progress, the implementation of measures to develop innovative infrastructure in the region, etc. It is concluded that with a strategic focus on smoothing out interregional disparities and equalizing opportunities for access to digital assets, interregional and intercountry digital differences can be compensated through effective institutional measures taken by state, including regional, administration.

Does the Agenda-Setting Effect Always Work?

The media is viewed as an external mechanism of corporate governance in a large body of literature. In agenda-setting research, the media can exert influence on corporate emissions behavior by controlling the public and government agenda. However, it is unclear whether such effect will be influenced by the regional institutional environment. The authors construct a theoretical framework including different types of media and corporate environmental behavior, which is used to investigate the impact of institution informatization on the media agenda-setting effect. The authors then used a sample of Chinese industrial enterprises from 2011 to 2014 to test this hypothesis. The empirical results reveal that both printing and electronic media elicit improvement on corporate environmental performance. Institutional informatization can significantly enhance the disincentive effect of electronic media on corporate emissions, while the moderating role in the relationship between printing media and corporate emissions is not significant.

Corporate Charitable Donation Under the Theory of Organizational Legitimacy from the Perspective of Listed Companies' Violations in a Regional Institutional Environment

This paper studies the legitimacy of listed companies from the perspective of violation. We use the violation data of all A-share non-financial listed companies in Shanghai and Shenzhen from 2006 to 2019 and look at the relationship between corporate violation and charitable donation, and the possible influence of the regional institutional environment of enterprises and the degree of association between enterprises and government on the relationship between corporate violations and charitable donations. Compared with violations at the organizational level, enterprises with violations at the executive level are more active regarding charitable donations. The moderating effect indicates that the institutional environment level of the geographical region where the enterprise is located strengthens the negative relationship between the offending enterprise and charitable donation. After dividing into congenital and acquired government enterprise association, the congenital Government Enterprise Association has a strengthening effect on the charitable donation behavior of illegal enterprises.

Impact of China's environmental protection tax on corporate performance: Empirical data from heavily polluting industries

The environmental protection tax (EPT) is an important environmental economic measure in China, and its main purpose is to protect the environment and reduce pollution emissions. We empirically investigate the impact of the EPT on corporate performance based on quarterly data from Chinese A-share listed companies in heavily polluting industries from the 3rd quarter of 2015 to 2020 using the difference-in-differences (DID) model. It is found that the imposition of the EPT significantly reduces the performance of heavily polluting companies in the short run. A mechanism test shows that the EPT has an innovation effect, “forcing” companies to increase their R&D investment and realize transformation and upgrading, which inhibits the growth of corporate performance in the short run. However, the green effect of the tax is weak, and there is no incentive for companies to invest in green innovation and environmental protection. Heterogeneity tests show that the better the regional institutional environment is, the more pronounced the implementation effect of the tax is; moreover, the smaller a firm is, the more pronounced the “pain” that the tax brings.

An empirical analysis based on a panel threshold model of the effect of Internet development on the efficiency of Chinese government public service supply.

With the development of information technology, improving the efficiency of public services with the help of the Internet has become an important work of local governments. However, under different institutional environments, the impact mechanism of Internet development on the supply efficiency of government public services is still unclear. Based on China's interprovincial panel data from 2011 to 2019, this paper constructs a threshold effect model, sets the institutional environment as the threshold variable, and empirically analyzes the impact of Internet development on the supply efficiency of government public services. The results show that the difference in regional institutional environment will lead to the obvious threshold effect of Internet development on the supply efficiency of government public services: When the institutional environment is poor, the role of Internet development on the supply efficiency of government public services is not significant. With the improvement of the institutional environment, the role of Internet development in promoting the supply efficiency of government public services gradually appears, but the marginal intensity of promotion weakens. Compared with existing studies that mostly use linear models, this paper incorporates the institutional environment into the complex relationship between Internet development and government public service supply efficiency, and clarifies the role of the institutional environment in the process of Internet development affecting government public service supply efficiency and the non-linear relationship among the three. This paper reveals the mechanism of Internet development affecting the supply efficiency of government public services under different institutional environments and provides a new perspective for solving the shortage of public services.

The impact of regional conditions on the business demographics of Russian IT companies

Information technology (IT) companies design and disseminate new technologies, sources of digital solutions for a wide range of economic agents. The size of the IT sector in Russia and its contribution to the national economy still lag behind the level of the leading countries. In recent years, the number of estab­lished IT companies has been declining, while the number of liquidated com­panies has been growing. The business demographics of IT companies represent exceptional regional differentiation, more than a twofold interregional gap on the birth and death rates. The paper explores the relationship between the demog­raphy of Russian IT companies from 2010 to 2020 with the help of regression analysis (Arellano—Bond method). The results showed a general shift of activity in the direction from east to west and an increase in the concentration of IT companies in metropolitan centers; stable differences between the western and eastern territories of Russia; the significance of regional institutional environment and habitat. The results of the study are important for decision making to support the development of the digital economy in Russian regions.

Addressing Public Policy Implementation Challenges in Lagging Regions Through the Analytical Lens of Smart Specialisation

Smart Specialisation Strategy (S3) research has contributed to better understanding of that policy framework’s conceptual underpinnings but some European regions still find it difficult to turn S3 theory into policy implementation. A key element of the implementation challenge concerns the enabling or constraining role of local institutions on regional development strategies and, more specifically, the entrepreneurial discovery process (EDP). Such a challenge appears to be particularly acute (and empirically unexplored) in lagging regions, characterised by weaker knowledge bases and innovation capacities. It is often in less advanced settings where weaker institutions are found. This paper addresses these gaps by investigating S3 implementation in lagging regions focusing on the dynamic interdependence between the regional institutional environment and EDP. It evidences how particular features of the regional institutional environment hinder EDP, as well as how institutional change could enable S3 implementation in two Greek regions. Our results reveal mutual interdependence between inadequate institutions and weak administrative and entrepreneurial capacities, creating adverse pre-conditions for S3 implementation. They also suggest that change requires the replacement of existing features of the institutional environment or creation of new ones, rather than gradual institutional adaptation or transformation.

The role of regional formal institutions in China's OFDI location choice and firm performance - The moderation roles of international experience and foreign capital utilization

Based on the micro data of Chinese enterprises, this paper examines the effects of regional formal institutional environment in China on the location choice and firm performance of Chinese OFDI, and discusses the roles played by international experience and the foreign capital usage. The results show that regional formal institutional environment of China significantly and positively affects the location choice and performance of Chinese OFDI. Moreover, different regional formal institutions have varied effects. In particular, institutional factors represented by the ‘government and market relationship’, ‘product market’ and ‘factor market’ development play the key role. It is also found that actual FDI utilization and firms’ international experience play positive and significant moderation roles in the institutional effect on China's OFDI, but such moderation effects are constrained to ‘intermediary organizations and legal environment’ as the institutional factor only. Therefore, the policy of improving regional institutional quality can have a positive effect on OFDI and corporate performance.

Do Chinese Family Values Inhibit Entrepreneurship?—An Analytical Perspective Based on Hofstede’s Cultural Dimension

Using the data of the China Family Tracking Survey (CFPS) of Peking University, this paper systematically studies the influence of Chinese family cultural values on Chinese entrepreneurship. Based on Hofstede’s national culture theory and from five dimensions of collectivism, power distance, masculinity, long-term orientation and uncertainty avoidance, this paper further constructs a comprehensive index of family cultural values. Through endogeneity test, it is found that the comprehensive family cultural values significantly improve the number of entrepreneurs, but not the quality of entrepreneurs. Among them, collectivism, masculinity and long-term orientation promote entrepreneurship, while power distance and uncertainty avoidance significantly inhibit it. Meanwhile, the entrepreneurial spirit of male group, rural group and low-education group is more significantly influenced by traditional family cultural values. Further research shows that with the improvement of regional marketization level, digital level and institutional environment represented by inclusive finance, the negative impact of power distance and uncertainty avoidance on entrepreneurship can be effectively reduced, but the positive impact of long-term orientation on entrepreneurship can also be reduced. The results of this paper show that in the process of cultivating entrepreneurship, we should not ignore the positive role of traditional culture, retain and carry forward the part of traditional culture that is conducive to entrepreneurship, gradually reduce the part of traditional culture that is not conducive to the development of entrepreneurship through the continuous improvement of the system environment, and improve the precision of the policy. We will further promote mass entrepreneurship and innovation.

Women executives and financing pecking order of GEM-listed companies: Moderating roles of social capital and regional institutional environment

This paper investigates the financing options of female executives within China’s unique environment. We examined 154 GEM enterprises listed on the Shenzhen Stock Exchange from 2009 to 2016. The data were analyzed using statistical procedures including multilevel regression analysis based on the existing financing pecking order models. Empirical evidence shows that women executives are less likely to use internal and debt financing. In terms of internal financing willingness, social capital and external institutional environment have negative and positive moderating effects respectively. In terms of debt financing willingness, social capital has a positive moderating effect. In addition, a poor external institutional environment has an amplifying effect on the moderating role of women executives’ social capital. Our study enriches current research on women executives' financing preferences which are limited to areas such as debt, equity financing and risk appetite and provides enlightenment for companies and women executives to improve their competitive advantages, and for government to optimize the external institutional environment.

Distribution Patterns and Multilevel Factors of the Innovation Activities of China’s New Energy Vehicle Industry

To better understand the multilevel mechanism of innovation and reveal the distribution and geographical formation of China’s NEV industry innovation, we collect patent data in China’s NEV industry from SIPO and use ArcGIS and HLM to map and analyze its geoinformation from 2009 to 2014. The results show that innovation activities are agglomerated at different scales, but the distribution of individual innovation and collaborative innovation are not similar, especially Pearl River Delta, which shows a great shortage of collaborative innovation. The multilevel effects are complicated. Institutional environment, resources, the regional institutional environment, and infrastructure have positive effects at the local level. Institutional environment is the only positive factor at the regional level. In general, regional factors enhance the positive effects of local factors. However, multilevel mechanism of collaborative innovation is different from the individual innovation, as it is less depended on policies stimulation and local knowledge institutions play a more important role in it. Furthermore, we put forward multilevel policies suggestions that central government should pay more attention on NEV products regulations, institutional environment should be improved at regional and local government should develop knowledge facilities in post-subsidy era. Our study highlights that locals that have advantages would benefit more from multilevel systems.

Regional institutional environment of public-private partnership: The case study of the Ural Federal District regions. Part 2

Subject. This article discusses the issues related to regulatory support for public-private partnership in the regions of the Ural Federal District. Objectives. The article aims to assess the institutional aspects of public-private partnership. Methods. For the study, we used a comparative analysis and the tabular methods to interpret the collected data. Results. The article points to the positive changes in the development of public-private partnership in the regions of the Ural Federal District. It also identifies institutional traps in local legislation and offers some recommendations to improve the investment climate. Conclusions. The article concludes that all the prerequisites for effective cooperation between private and public capitals have been created in the Ural Federal District regions. The development of public-private partnership is not possible without the continuous improvement of the institutional environment.

University-business-government relations in the development of the institutional environment of Russian regions

Relevance. University-business-government relations drive regional innovation. Therefore, in order to stimulate innovation, a favourable institutional environment is necessary. Research objective. The article proposes an original methodology to examine regional institutional environment based on the analysis of the interactions between the government, business and universities. Methods and data. The study relies on the statistical data on 12 Russian regions for a 6-year period. The data are used to create three sets of indicators characterizing the institutional sectors 'Government', 'Business' and 'Universities'. Regions are divided into clusters and ranked according to the state of their institutional environments by calculating subindices and the integral index. Other research methods include cluster analysis and correlation regression analysis. Results. The regions were grouped according to their innovation performance: in lagging regions, the interactions between the government, business and universities are inefficient, which means that their regional institutional environment is not conducive to innovation. The opposite situation is observed in the group of leaders. We also found that interactions between the government, business and universities have a direct influence on GRP. Conclusion. For each group of regions, areas for improvement and the corresponding measures were identified. Interventions may vary in terms of intensity and government participation.

Regional institutional environment of public-private partnership: The case study of the Ural Federal District regions. Part 1

Subject. This article discusses the issues related to institutional support for public-private partnership in the regions of the Ural Federal District. Objectives. The article aims to analyze the development of the regional institutional environment of public-private partnership and find regulatory deficiency. Methods. For the study, we used a comparative analysis and the graph and tabular methods to interpret the collected data. Results. The article presents certain results of the study of the institutional framework, strategic development and planning documents, the public-private partnership administration system, and the evaluation of its institutional environment. Conclusions. The local regulatory deficiency and the need to improve the investment climate of the Ural Federal District regions and attract new participants in the partnership confirm the relevance of the identified problem research.

R&D Intensity, Domestic Institutional Environment, and SMEs’ OFDI in Emerging Markets

Outward foreign direct investment (OFDI) of small and medium-sized enterprises (SMEs) from emerging economies has emerged as a significant phenomenon in global markets. However, extant research has not paid sufficient attention to this trend. Particularly, there is a lack of understanding of how SMEs’ internal resources may interact with their domestic institutional environment in driving OFDI. Drawing on the resource-based view and the institutional theory, this study fills this gap and examines how research and development (R&D) intensity influences OFDI frequency of SMEs from China, one of the largest emerging economies, and the moderating effects of coercive pressure, normative support, and mimetic force from SMEs’ domestic, regional institutional environment. Using a sample of 2620 Chinese SMEs publicly-listed on the Chinese Growth Enterprise Market during 2010–2017, we find that R&D intensity can be viewed as a key strategic resource that drives Chinese SMEs’ OFDI frequency and that three factors in their regional institutional environment (regional marketization, ties to industry associations, and peer OFDI frequency in the region) strengthen the relationship between R&D intensity and SMEs’ OFDI. This study contributes to the literature on SMEs’ OFDI by demonstrating the importance of combining the resource-based view and institutional theory to examine the roles played by both SMEs’ internal resources and their domestic institutional environment in driving their OFDI activities in emerging economies.