State Ownership and Firm Innovation in China: An Integrated View of Institutional and Efficiency Logics

Authors

Kevin Zheng Zhou, HKU Business School
Gerald Yong Gao, College of Business AdministrationFollow
Hongxin Zhao, St. Louis University

Document Type

Article

Keywords

agency theory, Chinese manufacturing, emerging economies, industrial competition, innovation, institutional theory, state ownership, state start-up

Abstract

Using two longitudinal panel datasets of Chinese manufacturing firms, we assess whether state ownership benefits or impedes firms’ innovation. We show that state ownership in an emerging economy enables a firm to obtain crucial R&D resources but makes the firm less efficient in using those resources to generate innovation, and we find that a minority state ownership is an optimal structure for innovation development in this context. Moreover, the inefficiency of state ownership in transforming R&D input into innovation output decreases when industrial competition is high, as well as for start-up firms. Our findings integrate the efficiency logic (agency theory), which views state ownership as detrimental to innovation, and institutional logic, which notes that governments in emerging economies have critical influences on regulatory policies and control over scarce resources. We discuss the implications of these findings for research on state ownership and firm innovation in emerging economies.

Publication Date

6-1-2017

Publication Title

Administrative Science Quarterly

ISSN

00018392

Volume

62

Issue

2

First Page

375

Last Page

404

DOI

10.1177/0001839216674457

Recommended Citation

Zhou, Kevin Zheng; Gao, Gerald Yong; and Zhao, Hongxin, "State Ownership and Firm Innovation in China: An Integrated View of Institutional and Efficiency Logics" (2017). College of Business Administration Faculty Works. 4.
DOI: https://doi.org/10.1177/0001839216674457
Available at: https://irl.umsl.edu/business-faculty/4