Abstract
This study combines the institution-based perspective and the innovation systems literature to examine the role of public policies in the entrepreneurship-innovation-performance relationships. It does so by presupposing a key mediating role for entrepreneurial orientation and by introducing environmental turbulence as a moderator. Data from a sample of 166 Guangdong Province manufacturing firms are used to test hypotheses, which distinguish between institutional pressures and incentives. Findings reveal the lesser relevance of institutional pressures whereas a more virtuous relationship between institutional incentives, entrepreneurial orientation and both innovation and overall performance emerges, especially when environmental turbulence increases. This is particularly clear with reference to firms’ overall performance. These findings are of theoretical and practical relevance for the study of the effects of public policies as regards their nature and the policy design mix.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
The rules established by the government to regulate property rights and procedures.
EU Official Exchange Rate for the month of March 2022, calculated at https://ec.europa.eu/info/funding-tenders/procedures-guidelines-tenders/information-contractors-and-beneficiaries/exchange-rate-inforeuro_it
Results of all the tests mentioned, available upon request.
i.e. Institutional Pressures, Institutional Incentives, Entrepreneurial Orientation, Environmental Turbulence, Innovation Performance and Overall Performance.
The Bartlett test of sphericity (at p < .0001) and Kaiser-Meyer-Oklin measure of sampling adequacy higher than 0.6 (.89) supports the appropriateness and goodness of the analysis made and of the results obtained.
References
Aloulou, W. J. (2018). Impacts of Strategic orientations on new product development and firm performances: Insights from Saudi industrial firms. European Journal of Innovation Management, 22(5), 257–280. https://doi.org/10.1108/EJIM-05-2018-0092
Ambec, S., Cohen, M. A., Elgie, S., & Lanoie, P. (2013). The Porter Hypothesis at 20: Can environmental regulation enhance innovation and competitiveness? Review of Environmental Economics and Policy, 7(1), 2–22. https://doi.org/10.1093/reep/res016
Barbieri, E., Di Tommaso, M. R., & Bonnini, S. (2012). Industrial development policies and performances in Southern China: Beyond the specialised industrial cluster program. China Economic Review, 23(3), 613–625. https://doi.org/10.1016/j.chieco.2010.12.005
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182. https://doi.org/10.1037/0022-3514.51.6.1173
Baumol, W. J. (1990). Entrepreneurship: Productive, unproductive, and destructive. Journal of Political Economy, 98(5), 893–921. https://doi.org/10.1086/261712
Blind, K. (2016). The impact of regulation on innovation. In J. Edler, P. Cunningham, A. Gök, & P. Shapira (Eds.), Handbook of innovation policy impact (pp. 450–482). Edward Elgar Publishing.
Blindenbach-Driessen, F., van Dalen, J., & Ende, J. (2010). Subjective Performance assessment of innovation projects. Journal of Product Innovation Management, 27(4), 572–592. https://doi.org/10.1111/j.1540-5885.2010.00736.x
Boon, W., & Edler, J. (2018). Demand, challenges, and innovation. Making sense of new trends in innovation policy. Science and Public Policy, 45(4), 435–47. https://doi.org/10.1093/scipol/scy014
Borras, S., & Edquist, C. (2014). Institutions and regulations in innovation systems: Effects, problems and innovation policy design. Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE). Lund University. Papers in Innovation Studies (no. 2014/29). Retrieved July 19, 2022, from http://www.circle.lu.se/upload/CIRCLE/workingpapers/201429_Borras_Edquist.pdf
Calantone, R., Garcia, R., & Droge, C. (2003). The effects of environmental turbulence on new product development strategy planning. Journal of Product Innovation Management, 20(2), 90–103. https://doi.org/10.1111/1540-5885.2002003
Casillas, J. C., & Moreno, A. M. (2010). The relationship between entrepreneurial orientation and growth: The moderating role of family involvement. Entrepreneurship & Regional Development, 22(3–4), 265–291. https://doi.org/10.1080/08985621003726135
Chan, R. Y. K., He, H. W., Chan, H. K., & Wang, W. Y. C. (2012). Environmental orientation and corporate performance: The mediation mechanism of green supply chain management and moderating effect of competitive intensity. Industrial Marketing Management, 41(4), 621–630. https://doi.org/10.1016/j.indmarman.2012.04.009
Chandler, G. N., & Hanks, S. H. (1993). Measuring the performance of emerging businesses: A validation study. Journal of Business Venturing, 8(5), 391–408. https://doi.org/10.1016/0883-9026(93)90021-V
Chaston, I., & Sadler-Smith, E. (2012). Entrepreneurial cognition, entrepreneurial orientation and firm capability in the creative industries. British Journal of Management, 23(3), 415–432. https://doi.org/10.1111/j.1467-8551.2011.00752.x
Chew, T. C., Tang, Y. K., & Buck, T. (2022). The interactive effect of cultural values and government regulations on firms’ entrepreneurial orientation. Journal of Small Business and Enterprise Development, 29(2), 221–240. https://doi.org/10.1108/JSBED-06-2021-0228
Ciabuschi, F., Baraldi, E., Lindahl, O., & Callegari, S. (2020). Supporting innovation against the threat of antibiotic resistance: Exploring the impact of public incentives on firm performance and entrepreneurial orientation. Journal of Business Research, 112, 271–280. https://doi.org/10.1016/j.jbusres.2019.12.021
Costantini, V., Crespi, F., Martini, C., & Pennacchio, L. (2015). Demand-pull and technology-push public support for eco-innovation: The case of the biofuels sector. Research Policy, 44(3), 577–595. https://doi.org/10.1016/j.respol.2014.12.011
Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10(1), 75–87. https://doi.org/10.1002/(ISSN)1097-0266
Covin, J. G., & Wales, W. (2012). The measurement of entrepreneurial orientation. Entrepreneurship Theory and Practice, 36(4), 677–702. https://doi.org/10.1111/j.1540-6520.2010.00432.x
Cunningham, P., Gök, A., & Larédo, P. (2016). The impact of direct support to R&D and innovation in firms. In J. Edler, P. Cunningham, A. Gök, & P. Shapira (Eds.), Handbook of innovation policy impact (pp. 54–107). Edward Elgar Publishing.
Danneels, E., & Sethi, R. (2011). New product exploration under environmental turbulence. Organization Science, 22(4), 1026–1039. https://doi.org/10.1287/orsc.1100.0572
De Clercq, D., Dimov, D., & Thongpapanl, N. (2013). Organizational social capital, formalization, and internal knowledge sharing in entrepreneurial orientation formation. Entrepreneurship Theory and Practice, 37(3), 505–537. https://doi.org/10.1111/etap.12021
Di Tommaso, M. R., Rubini, L., & Barbieri, E. (2012). Southern China industry, development and industrial policy. Routledge.
Diánez-González, J. P., Camelo-Ordaz, C., & Fernández-Alles, M. (2021). Drivers and implications of entrepreneurial orientation for academic spin-offs. International Entrepreneurship and Management Journal, 17(2), 1007–1035. https://doi.org/10.1007/s11365-020-00652-3
Doblinger, C., Dowling, M., & Helm, R. (2016). An institutional perspective of public policy and network effects in the renewable energy industry: Enablers or disablers of entrepreneurial behaviour and innovation? Entrepreneurship & Regional Development, 28(1–2), 126–156. https://doi.org/10.1080/08985626.2015.1109004
Drouillard, M. (2017). Addressing voids: How digital start-ups in Kenya create market infrastructure. In B. Ndemo & T. Weiss (Eds.), Digital Kenya (pp. 97–131). Palgrave Studies of Entrepreneurship in Africa.
Drucker, P. F. (1985). Innovation and entrepreneurship: Practices and principles. Harper & Row.
Eckhardt, J. T., & Shane, S. A. (2003). Opportunities and entrepreneurship. Journal of Management, 29(3), 333–349. https://doi.org/10.1016/S0149-2063(02)00225-8
Edler, J., Cunningham, P., Gok, A., & Shapira, P. (2016). Handbook of innovation policy impact. Edward Elgar Publishing.
Edler, J., & Fagerberg, J. (2017). Innovation policy: What, why, and how. Oxford Review of Economic Policy, 33(1), 2–23. https://doi.org/10.1093/oxrep/grx001
Edquist, C., & Johnson, B. (1997). Institutions and organizations in systems of innovation. In C. Edquist (Ed.), Systems of innovation: Technologies, institutions and organizations (pp. 41–63). Pinter.
Falahat, M., Lee, Y. Y., Soto-Acosta, P., & Ramayah, T. (2021). Entrepreneurial, market, learning and networking orientations as determinants of business capability and international performance: The contingent role of government support. International Entrepreneurship and Management Journal, 17(4), 1759–1780. https://doi.org/10.1007/s11365-020-00738-y
Fink, M., & Harms, R. (2012). Contextualizing the relationship between self-commitment and performance: Environmental and behavioural uncertainty in (cross-border) alliances of SMEs. Entrepreneurship & Regional Development, 24(3–4), 161–179. https://doi.org/10.1080/08985626.2012.670911
Flatten, T. C., Greve, G. I., & Brettel, M. (2011). Absorptive capacity and firm performance in smes: The mediating influence of strategic alliances. European Management Review, 8(3), 137–152. https://doi.org/10.1111/j.1740-4762.2011.01015.x
Freeman, C. (1987). Technology policy and economic performance: Lessons from Japan. Pinter.
Fritz, M. S., & MacKinnon, D. P. (2007). Required sample size to detect the mediated effect. Psychological Science, 18(3), 233–239. https://doi.org/10.1111/j.1467-9280.2007.01882.x
Gao, X. (2021). The comparative impact of solar policies on entrepreneurship in the U.S. solar photovoltaic installation industry. Energy Policy, 156, 112389. https://doi.org/10.1016/j.enpol.2021.112389
Georgopoulos, A., & Glaister, K. (2017). Firm heterogeneity and performance in a turbulent economic environment: Evidence from Greece. European Management Review, 15. https://doi.org/10.1111/emre.12144
Goel, S., & Karri, R. (2020). Entrepreneurial aspirations and poverty reduction: The role of institutional context. Entrepreneurship & Regional Development, 32(1–2), 91–111. https://doi.org/10.1080/08985626.2019.1640484
Grande, J., Madsen, E. L., & Borch, O. J. (2011). The relationship between resources, entrepreneurial orientation and performance in farm-based ventures. Entrepreneurship & Regional Development, 23(3–4), 89–111. https://doi.org/10.1080/08985620903183710
Hayes, A. F. (2018). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (methodology in the Social Sciences). The Guilford Press.
Hu, L., Gu, J., Wu, J., & Lado, A. A. (2018). Regulatory focus, environmental turbulence, and entrepreneur improvisation. International Entrepreneurship and Management Journal, 14, 129–148. https://doi.org/10.1007/s11365-017-0446-7
Jack, S., Drakopoulou Dodd, S., & Anderson, A. R. (2008). Change and the development of entrepreneurial networks over time: A processual perspective. Entrepreneurship & Regional Development, 20(2), 125–159. https://doi.org/10.1080/08985620701645027
James, L. R., & Brett, J. M. (1984). Mediators, moderators, and tests for mediation. Journal of Applied Psychology, 69, 307–321. https://doi.org/10.1037/0021-9010.69.2.307
Jennings, D. F., & Young, D. M. (1990). An empirical comparison between objective and subjective measures of the product innovation domain of corporate entrepreneurship. Entrepreneurship Theory and Practice, 15(1), 53–66. https://doi.org/10.1177/104225879001500106
Kantur, D. (2016), Strategic entrepreneurship: mediating the entrepreneurial orientation-performance link. Management Decision, 54(1), 24–43. https://doi.org/10.1108/MD-11-2014-0660
Keh, H. T., Nguyen, T. T. M., & Ng, H. P. (2007). The effects of entrepreneurial orientation and marketing information on the performance of SMEs. Journal of Business Venturing, 22(4), 592–611. https://doi.org/10.1016/j.jbusvent.2006.05.003
Kemelgor, B. H. (2002). A comparative analysis of corporate entrepreneurial orientation between selected firms in the Netherlands and the USA. Entrepreneurship & Regional Development, 14(1), 67–87. https://doi.org/10.1080/08985620110087023
Li, J., & Kozhikode, R. (2008). Knowledge management and innovation strategy: The challenge for latecomers in emerging economies. Asia Pacific Journal of Management, 25(3), 429–450. https://doi.org/10.1007/s10490-007-9076-x
Liu, X. (2008). China's Development Model: An Alternative Strategy for Technological Catch-Up (SLPTMD Working Paper Series No. 020). University of Oxford.
Lumpkin, G. T., Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21, 135–172. https://doi.org/10.5465/AMR.1996.9602161568
Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16(5), 429–451. https://doi.org/10.1016/S0883-9026(00)00048-3
Lundvall, B. A. (1992). National systems of innovation. Pinter.
Madsen, E. L. (2007). The significance of sustained entrepreneurial orientation on performance of firms – A longitudinal analysis. Entrepreneurship & Regional Development, 19(2), 185–204. https://doi.org/10.1080/08985620601136812
Meyer, K. E., & Peng, M. W. (2016). Theoretical foundations of emerging economy business research. Journal of International Business Studies, 47(1), 3–22. https://doi.org/10.1057/jibs.2015.34
Michael, S. C., & Pearce, J. A. (2009). The need for innovation as a rationale for government involvement in entrepreneurship. Entrepreneurship & Regional Development, 21(3), 285–302. https://doi.org/10.1080/08985620802279999
Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770–792. https://doi.org/10.1287/mnsc.29.7.770
Mthanti, T., & Ojah, K. (2017). Entrepreneurial orientation (EO): Measurement and policy implications of entrepreneurship at the macroeconomic level. Research Policy, 46(4), 724–739. https://doi.org/10.1016/j.respol.2017.01.012
Mueller, V., Rosenbusch, N., & Bausch, A. (2013). Success patterns of exploratory and exploitative innovation: A meta-analysis of the influence of institutional factors. Journal of Management, 39(6), 1606–1636. https://doi.org/10.1177/0149206313484516
Mullins, J. W., & Komisar, R. (2009). Getting to plan B: Breakthrough to a better business model. Harvard Business Press.
Naldi, L., Larsson, J. P., & Westlund, H. (2020). Policy entrepreneurship and entrepreneurial orientation in vulnerable Swedish municipalities. Entrepreneurship & Regional Development, 32(7–8), 473–491. https://doi.org/10.1080/08985626.2020.1798557
Nelson, R. (1993). National innovation systems: A comparative analysis. University Press.
Nelson, R. (1995). Why should managers be thinking about technology policy? Strategic Management Journal, 16(8), 581–588. https://doi.org/10.1002/smj.4250160802
Nemet, G. F. (2009). Demand-pull, technology-push, and government-led incentives for non-incremental technical change. Research Policy, 38(5), 700–709. https://doi.org/10.1016/j.respol.2009.01.004
North, D. C. (1990). Institutions, institutional change, and economic performance. Cambridge University Press.
OECD. (2019). Digital for SMEs global initiative. Concept note. Retrieved July 14, 2022, from https://www.oecd.org/digital/sme/
Pandit, D., Joshi, M. P., Sahay, A., & Gupta, R. K. (2018). Disruptive innovation and dynamic capabilities in emerging economies: Evidence from the Indian automotive sector. Technological Forecasting and Social Change, 129, 323–329. https://doi.org/10.1016/j.techfore.2017.09.035
Peng, M. W., Wang, Y. L. D., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5), 920–936. https://doi.org/10.1057/PALGRAVE.JIBS.8400377
Petti, C., Tang, Y., & Margherita, A. (2019). Technological innovation vs technological backwardness patterns in latecomer firms: An absorptive capacity perspective. Journal of Engineering and Technology Management, 51, 10–20. https://doi.org/10.1016/j.jengtecman.2019.02.002
Porter, M. E., & van der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118. https://doi.org/10.1257/jep.9.4.97
Rauch, A., Wiklund, J., Lumpkin, G. T., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestion for the future. Entrepreneurship Theory and Practice, 33(3), 761–781. https://doi.org/10.1111/j.1540-6520.2009.00308.x
Roper, S., & Tapinos, E. (2016). Taking risks in the face of uncertainty: An exploratory analysis of green innovation. Technological Forecasting and Social Change, 112, 357–363. https://doi.org/10.1016/j.techfore.2016.07.037
Rosenbusch, N., Rauch, A., & Bausch, A. (2013). The mediating role of entrepreneurial orientation in the task environment–performance relationship: A meta-analysis. Journal of Management, 39(3), 633–659. https://doi.org/10.1177/0149206311425612
Rwehumbiza, D., & Marinov, M. A. (2020). Development of entrepreneurial orientation of export manufacturers from emerging economies. International Entrepreneurship and Management Journal, 16, 667–689. https://doi.org/10.1007/s11365-019-00580-x
Schumpeter, J. (1934). The theory of economic development. Oxford University Press.
Scott, W. R. (2008). Institutions and organizations: Ideas and interests. Sage.
Shahadan, F. (2001). Bumiputera commercial and industrial community in the food-processing industry: An analysis of institutional support. Humanomies, 17(1), 86–98. https://doi.org/10.1108/eb018862
Shu, C. L., Wang, Q., Gao, S. X., & Liu, C. J. (2015). Firm patenting, innovations, and government institutional support as a double-edged sword. Journal of Product Innovation Management, 32(2), 290–305. https://doi.org/10.1111/jpim.12230
Simpson, D., & Bradford, R. L. (1996). Taxing variable cost: Environmental regulation as industrial policy. Journal of Environmental Economics and Management, 30(3), 282–300. https://doi.org/10.1006/jeem.1996.0019
Slater, S. F., & Narver, J. C. (1995). Market orientation and the learning organization. Journal of Marketing, 59(3), 63–74. https://doi.org/10.2307/1252120
Smart, D. T., & Conant, J. S. (1994). Entrepreneurial orientation, distinctive marketing competencies and organizational performance. Journal of Applied Business Research, 10(3), 28–38. https://doi.org/10.19030/jabr.v10i3.5921
Stewart, L. A. (2011). The impact of regulation on innovation in the United States: A cross-industry literature review. Information Technology&Innovation Foundation.
Tassey, G. (1997). The economics of R&D policy. Quorum Books.
Tang, Y., Hu, X., Petti, C., & Thürer, M. (2019). Institutional incentives and pressures in Chinese manufacturing firms’ innovation. Management Decision, 58(5), 812–827. https://doi.org/10.1108/MD-08-2018-0933
Tang, Y., Hu, X., Petti, C., & Thürer, M. (2020). Institution-driven innovation in Guangdong firms: Moderating effects of in-house formal R&D and industrial environment turbulence. Science and Public Policy, 47(2), 194–206. https://doi.org/10.1093/scipol/scz058
Tognazzo, A., Gubitta, P., & Favaron, S. D. (2016). Does slack always affect resilience? A study of quasi-medium-sized Italian firms. Entrepreneurship & Regional Development, 28(9–10), 768–790. https://doi.org/10.1080/08985626.2016.1250820
Wang, C. L. (2008). Entrepreneurial orientation, learning orientation, and firm performance. Entrepreneurship Theory and Practice, 32(4), 635–657. https://doi.org/10.1111/j.1540-6520.2008.00246.x
Wang, M. C., Chen, P. C., & Fang, S. C. (2021). How environmental turbulence influences firms’ entrepreneurial orientation: The moderating role of network relationships and organizational inertia. Journal of Business & Industrial Marketing, 36(1), 48–59. https://doi.org/10.1108/JBIM-05-2019-0170
Wang, Y., & Zhang, X. (2009). Operationalization of corporate entrepreneurship and its performance implications in China: An empirical study. Journal of Chinese Entrepreneurship, 1(1), 8–20.
Westhead, P., Wright, M., & Ucbasaran, D. (2004). Internationalization of private firms: Environmental turbulence and organizational strategies and resources. Entrepreneurship & Regional Development, 16(6), 501–522. https://doi.org/10.1080/0898562042000231929
Williamson, P. J., Wan, F., Eden, Y., & Linan, L. (2020). Is disruptive innovation in emerging economies different? Evidence from China. Journal of Engineering and Technology Management, 57, 101590. https://doi.org/10.1016/j.jengtecman.2020.101590
Wiklund, J. (1999). The sustainability of the entrepreneurial orientation—performance relationship. Entrepreneurship Theory and Practice, 24(1), 37–48. https://doi.org/10.1177/104225879902400103
Wiklund, J., & Shepherd, D. (2003). Knowledge-based resources, entrepreneurial orientation, and the performance of small and medium sized business. Strategic Management Journal, 24(13), 1307–1314. https://doi.org/10.1002/smj.360
Wong, S. (2014). Impacts of environmental turbulence on entrepreneurial orientation and new product success. European Journal of Innovation Management, 17(2), 229–249. https://doi.org/10.1108/EJIM-04-2013-0032
Wong, S. K. S. (2012). Environmental requirements, knowledge sharing and green innovation: Empirical evidence from the electronics industry in China. Business Strategy and the Environment, 22(5), 321–338. https://doi.org/10.1002/bse.1746
Wu, J., & Chen, X. (2014). Home country institutional environments and foreign expansion of emerging market firms. International Business Review, 23(5), 862–872. https://doi.org/10.1016/j.ibusrev.2014.01.004
Young, S. L., Welter, C., & Conger, M. (2018). Stability vs. flexibility: The effect of regulatory institutions on opportunity type. Journal of International Business Studies, 49(4), 407–441. https://doi.org/10.1057/s41267-017-0095-7
Acknowledgements
The authors received no financial support for the research, authorship, and publication of this article.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Competing interests
The authors report there are no competing interests to declare.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Petti, C., Compagnucci, L. & Tang, Y. Institutions, innovation and performance in Guangdong firms: The role of entrepreneurial orientation and environmental turbulence. Int Entrep Manag J 20, 393–419 (2024). https://doi.org/10.1007/s11365-023-00878-x
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11365-023-00878-x