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Innovation and Performance of Manufacturing Firms in Aspirant Markets: An Institutional Environment Approach

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Abstract

The recent years have witnessed an increasing number of manufacturers in developed markets pursuing service-led innovation to secure their sustainable growth and competitive positions. This study compares the manufacturing firm performance outcomes of two types of innovation activities in the value chain (i.e., service innovation and product innovativeness) contingent on institutional environment but in an aspirant market – China. To do so we conducted two studies: A secondary data study (Study 1) used a longitudinal panel dataset of 1,167 manufacturing firms and a robustness study (Study 2) used primary survey data from 171 manufacturing firms. Both studies offer consistent empirical results that in the dysfunctional competition environment, and in contrast to product innovativeness, service innovation is less effective for manufacturing performance but works more effectively for performance in the complicated institutional environment when government support and dysfunctional competition co-exist. The research contributes to the fields of aspirant markets and innovation by developing our understanding of the firm’s strategic responses pertaining to innovation in the context of a complicated institutional environment, the latter informed by structuration theory. The paper offers a fine-grained view to manufacturing innovation and provides the practical implications for managers and clear guidance to firms and governments in the aspirant markets in regards to innovation practice, strategy, and policy.

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Notes

  1. Bruton et al (2021: p.1) suggested that economies such as China “should be considered as having emerged and now aspiring”, and proposed three characteristics for aspirant markets: (1) The country is an upper middle-income economy seeking to become a high income economy, (2) The economy has positive and steady economic growth and stable institutions, and (3) the economic organization matches the cultural and historical needs of that country and particularly encourages innovation and new venture creation.

  2. https://www.enterprisesurveys.org/

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Acknowledgements

We appreciate constructive comments from the anonymous reviewers and the assigned editor Professor Debmalya Mukherjee. This research was supported by National Natural Science Foundation of China (Grant No. 72091311; 72103183), Center for Transnationals’ Studies Foundation of Nankai University (Grant No. ctsnk202102) and Zhejiang Provincial Natural Science Foundation of China (Grant No. LQ20G020004).

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Authors and Affiliations

  1. Center for Transnationals’ Studies, Center for Global Marketing Research, Nankai University, 94 Weijin Road, Tianjin, China

    Feng Zhang

  2. MacRobert Building, Business School, University of Aberdeen, Aberdeen, AB24 5UA, Scotland, UK

    Haina Zhang

  3. Department of Management Sciences, Lancaster University Management School, Lancaster, LA1 4YX, UK

    David H. Brown

  4. School of Business Administration, Zhejiang Gongshang University, 38 Xuezheng Street, Hangzhou, China

    Xile Yin

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  1. Feng Zhang
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Table 10 Measurement (Study 2)
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Zhang, F., Zhang, H., Brown, D.H. et al. Innovation and Performance of Manufacturing Firms in Aspirant Markets: An Institutional Environment Approach. Asia Pac J Manag 40, 435–482 (2023). https://doi.org/10.1007/s10490-021-09790-w

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