Identifying the influence of institutional factors on the R&D activities of Chinese SMEs. Issue 1 (2nd January 2016)

• Record Type: Journal Article
• Authors: Cai, Di; Shen, Hao; Liu, Bing
• Is Part Of: Innovation. Volume 18:Issue 1(2016)
• Page Start: 54
• Page End: 73
• Publication Date: 2016-01-02
• Subjects: R&D activities -- institutions -- government intervention -- financial market development -- legal system quality; Research, Industrial -- Asia -- Periodicals; Research, Industrial -- Pacific Area -- Periodicals; Technological innovations -- Asia -- Periodicals; Technological innovations -- Pacific Area -- Periodicals; Research, Industrial; Technological innovations; Asia; Pacific Area; Electronic journals; Periodicals; 658.4063
• DOI: 10.1080/14479338.2016.1187076
• Languages: English
• ISSNs: 1447-9338

Abstract

Abstract : It is now well accepted that R&D activities are becoming a key driver of organizational change and performance growth for small and medium enterprises (SMEs). However, not all SMEs are successful at engaging in R&D activities. It is worthwhile to identify the determinants of SMEs' R&D activities. Researchers have mainly focused on organizational strategies and market environment conditions as the antecedents and barriers of SMEs' R&D activities while ignoring the role of the institutional context in which SMEs operate. In transitional economies such as China, institutional factors are key and important determinants of a firm's strategic decisions. Therefore, drawing on the institution-based view, this paper attempts to identify the influences of institutional factors on SMEs' R&D activities. Using a unique 2005 World Bank survey data-set comprising Chinese SMEs from 120 cities, the empirical results show that government intervention has a negative effect and that financial market development and legal system quality have positive effects on SMEs' R&D activities. Based on these findings, we argue that policymakers in transitional economies such as China should create favorable institutional environments for SMEs to foster innovation.