We study the impact of formal and informal institutional constraints on firm innovation, using 2012 World Bank Enterprise Survey data in China. We propose a framework identifying both the degree of innovative performance and innovator type of the firm. Our analysis shows that (1) constraints of formal governmental system positively associate with firm innovative performance, making firms more likely to be innovators than non-innovators; (2) constraints of legal system make firms more likely to be imitators than innovators; (3) formal financial constraints negatively associate with firm innovative performance and make firms more likely to be non-innovators than innovators; (4) prevalence of briberies make firms more likely to be either non-innovators or less-effective innovators than innovators. Our study enriches institutional theory and innovation research by building a framework that encompasses multiple dimensions of formal and informal institutional constraints and two levels of innovative performance, and offers deeper understanding of innovative performance of small and medium firms in transition economies like China.
|Name||Academy of Management Annual Meeting Proceedings|
|Publisher||Academy of Management|