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

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...

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Bibliographic Details
Published in:Administrative science quarterly 2017-06, Vol.62 (2), p.375-404
Main Authors: Zhou, Kevin Zheng, Gao, Gerald Yong, Zhao, Hongxin
Format: Article
Language:English
Subjects:
Agency theory
Companies
Competition
Efficiency
Emerging markets
Government sponsored enterprises
Industrial policy
Innovations
Manufacturing
Ownership
Panel data
Principal-agent models
R&D
Research & development
Studies
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Summary: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.
ISSN:0001-8392
1930-3815
DOI:10.1177/0001839216674457