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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.

This paper examines the role of technological capability in product innovation. Building on the absorptive capacity perspective and organizational inertia theory, the authors propose that technological capability has curvilinear and dijferential effects on exploitative and explorative innovations. The findings support the proposition that though technological capability fosters exploitation at an accelerating rate, it has an inverted U-shaped relationship with exploration.That is, a high level of technological capability impedes explorative innovation. Strategic flexibility strengthens the positive effects of technological capability on exploration, such that when strategic flexibility is high, greater technological capability is associated with more explorative innovation.

Despite the rising interest in environmental strategies, few studies have examined how managerial cognition of such strategies influences actual innovation capability development. Taking a managerial cognition perspective, this study investigates how managers' perceptions of institutional pressures relate to their focus on proactive environmental strategy, which in turn affects firms' realized innovation capability. The findings from a primary survey and three secondary datasets of publicly listed companies in China reveal that managers' perceived business and social pressures are positively associated with their focus on proactive environmental strategy, which consequently fosters innovation capability development. Moreover, state ownership and government administrative control weaken the impact of managerial focus on proactive environmental strategy on innovation capability. These findings have important implications for how managerial cognition supports environmental strategy and organizational capability building under the influence of institutional pressures and government intervention.

Despite the centrality of fairness in the moral and social fabric of governance, few studies relate fairness to contracting research. This paper assesses whether fairness accounts for the effects of contractual complexity and contractual recurrence on exchange performance. Based on a sample of 283 buyer—supplier dyads, we find that procedural fairness partially mediates the effect of contractual complexity, whereas distributive fairness partially mediates the effect of contractual recurrence in fostering exchange performance. Moreover, monitoring better supports the use of contractual complexity, whereas socializing better supports the use of contractual recurrence in enhancing fairness perceptions. These results suggest that contractual design must go beyond its safeguarding function to establish a fair frame of reference, and managers should complement contracts with appropriate practices (e.g., monitoring or socializing).

This paper examines how existing knowledge base (i.e., knowledge breadth and depth) interacts with knowledge integration mechanisms (i.e., external market knowledge acquisition and internal knowledge sharing) to affect radical innovation. Survey data from high technology companies in China demonstrate that the effects of knowledge breadth and depth are contingent on market knowledge acquisition and knowledge sharing in opposite ways. In particular, a firm with a broad knowledge base is more likely to achieve radical innovation in the presence of internal knowledge sharing rather than market knowledge acquisition. In contrast, a firm with a deep knowledge base is more capable of developing radical innovation through market knowledge acquisition rather than internal knowledge sharing.

An ongoing debate in the interfirm exchange literature concerns whether economic and social governance mechanisms function as substitutes or complements. We advance a more nuanced approach to examining how detailed contracts and centralized control interact with relational governance differentially in curbing local supplier opportunism in emerging markets. We suggest that where legal institutions are weak, detailed contracts are ineffective in containing partner opportunism in contractually specified areas. Under such circumstances, relational governance provides a proxy for legal institutions to ensure contract execution. Meanwhile, relational governance serves as an alternative mechanism to centralized control for ensuring contingency adaptations. Based on a sample of 168 foreign buyer-local supplier exchanges in China, we find that relational governance complements detailed contracts but substitutes for centralized control in curtailing opportunism. Therefore foreign firms must be cautious in their combinative use of social and economic mechanisms in governing exchanges with local suppliers in emerging markets.

Building on institutional and transaction cost economics, this article proposes that legal enforceability increases the use of contract over relational reliability (e.g., beliefs that the other party acts in a non-opportunistic manner) to safeguard market exchanges characterized by non-trivial hazards. The results of 399 buyer-supplier exchanges in China show that: (1) when managers perceive that the legal system can protect their firm's interests, they tend to use explicit contracts rather than relational reliability to safeguard transactions involving risks (i.e., asset specificity, environmental uncertainty, and behavioral uncertainty); and (2) when managers do not perceive the legal system as credible, they are less likely to use contracts, and instead rely on relational reliability to safeguard transactions associated with specialized assets and environmental uncertainty, but not those involving behavioral uncertainty. We further find that legal enforceability does not moderate the effect of relational reliability on contracts, but does weaken the effect of contracts on relational reliability. These results endorse the importance of prior experience (e.g., relational reliability) in supporting the use of explicit contracts, and alternatively suggest that, under conditions of greater legal enforceability, the contract signals less regarding one's intention to be trustworthy but more about the efficacy of sanctions.

Drawing on institutional and signaling theories, this study examines how environmental corporate social responsibility (ECSR) affects firm performance in a dysfunctional institutional environment. We extend the ECSR literature by suggesting that ECSR indirectly influences firm performance through the mediating effects of business and political legitimacy. Based on a dataset of 238 firms in China, we find that ECSR affects business and political legitimacy followed by firm performance. Moreover, legal incompleteness weakens and legal inefficiency strengthens the effects of ECSR on business and political legitimacy.

Our research empirically assesses two distinct bases for trust: calculative trust, based on a structure of rewards and penalties, versus relational trust, a judgment anchored in past behavior and characterized by a shared identity. We find that calculative trust and relational trust positively influence supplier performance, with calculative trust having a stronger association than relational trust. Yet, important boundary conditions exist. If buyers invest in supplier-specific assets or when supply side market uncertainty is high, relational trust, not calculative trust, is more strongly associated with supplier performance. In contrast, when behavioral uncertainty is high, calculative trust, not relational trust, relates more strongly to supplier performance. These results highlight the value of examining distinct forms of trust.

The marketing channel literature has paid limited attention to institutional environments that constrain buyer–supplier exchanges, though such institutions are fundamental determinants of transaction costs, and thus of the occurrence of opportunism in the buyer–supplier dyads. Drawing on transaction cost economics and institutional theory, this study uncovers the critical influence of formal and informal institutions (i.e., legal effectiveness and networking expenditure) on the use of governance in deterring opportunism, as well as the moderating role of government support on the efficacy of governance mechanism. The findings from a buyer–supplier dyadic survey and 2 secondary datasets reveal that legal effectiveness mitigates opportunism through increased use of both contractual and relational governance; in contrast, networking expenditure reduces opportunism through relational governance, yet increases opportunism via lowering contractual governance. In addition, contractual governance is more efficient in constraining opportunism when government support is high, whereas relational governance deters opportunism more when government support is low. These findings offer important implications for academic research and managerial practice.