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The impact of state shares on corporate innovation strategy and performance in China

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Abstract

This paper examines the impact of state shares on corporate innovation strategy and performance in the People’s Republic of China (PRC). Through an investigation of 541 publicly traded companies in five high-tech industries during the period between 2000 and 2005, we find that the presence of state shares have a positive effect on the corporate choice of a process innovation strategy over a product innovation one. However, this relationship is moderated by the overall ownership concentration ratio. Moreover, our findings suggest that companies with large state shares prefer to conduct innovations independently rather than collaboratively with others, and they usually achieve better innovation performance. These findings indicate that the government play a role as both an investor and a resource allocation coordinator and therefore complicate the relationship between ownership structure and corporate innovation activities.

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Notes

  1. Cohen and Levinthal (1990) explain “lockout” that “If the firm does not develop its absorptive capacity in some initial period, then its beliefs about the technological opportunities present in a given field will tend not to change over time because the firm may not be aware of the significance of signals that would otherwise revise its expectations. As a result, the firm does not invest in absorptive capacity and, when new opportunities subsequently emerge, the firm may not appreciate them.”

  2. The State Census Bureau, “The R&D Funds for mid- and large industrial companies stride to billions” http://www.sts.org.cn/tjbg/dzxqy/documents/2006/060824.htm

  3. “A comparative Study of the R&D Expenditure” from Major Science and Technology Index, http://www.sts.org.cn/tjbg/zhqk/documents/2006/061116.htm#_ftn1

  4. For instance, on December 18, 2006, China’s State-Owned Assets Supervision and Administration Commission of the State Council announced that the state assets shall dominate in seven pillar industries, though large SOEs in these industries shall be traded in stock markets.

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Authors and Affiliations

  1. School of Business, Renmin University of China, No. 59 Zhongguancun Street, Haidian District, Beijing, 100872, China

    Erming Xu

  2. School of Business Administration, Capital University of Economics and Business, No. 121 Zhangjialukou Street, Fengtai District, Beijing, 100070, China

    Han Zhang

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  1. Erming Xu
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  2. Han Zhang
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Correspondence to Han Zhang.

Additional information

This research was sponsored by the National Natural Science Foundation of the People’s Republic of China (Project No. 70672793). The authors would like to thank the three editors of this Special Issue (Yuan Lu, Eric Tsang, and Mike Peng), the anonymous reviewer, and J. T. Li and Peter Li, for their valuable comments on the earlier versions. We are grateful to Yao Jun and Li Weiwen for their help on the data analysis.

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Xu, E., Zhang, H. The impact of state shares on corporate innovation strategy and performance in China. Asia Pac J Manage 25, 473–487 (2008). https://doi.org/10.1007/s10490-008-9093-4

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