The Role of Government Affiliation in Explaining Firm Innovativeness and Profitability in Emerging Countries: Evidence from China

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  • Authors:
  • Chengqi Wang
  • Mario Kafouros
  • Jingtao Yi
  • Junjie Hong
  • Panagiotis Ganotakis

Abstract

Drawing from institutional polycentrism, we advance understanding of how affiliation with different government levels influences innovativeness and profitability in emerging countries. Our framework suggests that as different government levels vary in their objectives and resources, they affect firm innovativeness vis-à-vis profitability in qualitatively different ways. The analysis of 18,430 Chinese firms shows that affiliation with higher-level governments enhances firms’ innovativeness, whereas affiliation with lower-level governments is effective for enhancing profitability. Our framework also clarifies how location-specific institutional substitution occurs, indicating that the usefulness of government affiliation for innovativeness depends on how effectively legal institutions protect intellectual property in each region.

Bibliographical metadata

Original languageEnglish
Article number101047
JournalJournal of World Business
Volume55
Issue number3
DOIs
Publication statusPublished - 30 Nov 2019

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