Three essays on firm innovation strategy and capability in emerging markets

Abstract

In a business environment featured by frequent upheavals and intensive competition, the issue of how to effectively manage innovation to gain competitive advantage is intriguing for both researchers and practitioners. Over the past three decades, innovation research has advanced significantly, with numerous studies spring taking roots in different theoretical perspectives and tackling many aspects of this complex phenomenon. To shed new light on the burgeoning research on innovation, I have conducted three studies-as detailed in the three essays of this-to explore how various factors influence the innovation success in different types of firms. The first essay examines how the ambidextrous innovation strategy contributes to international joint venture (IJV) performance. Whereas prior literature views ambidexterity as critical for firms to achieve sustainable competitive advantage, controversy exists regarding its conceptualization and operationalization. To address this gap, this essay considers ambidexterity as congruence and incongruence between exploitation and exploration and uses the polynomial regression procedure to examine their effects on IJV performance outcomes. The empirical results based on a sample of 191 IJVs in China reveal that the congruence between exploitation and exploration has an inverted U-shaped effect on IJV performance, whereas the incongruence between exploitation and exploration has a U-shaped effect. Moreover, IJV parent control moderates the ambidexterity-IJV performance link. The congruence between exploitation and exploration leads to greater IJV performance when foreign parent control is higher. In contrast, the incongruence between exploitation and exploration generates superior IJV performance when foreign parent control is lower. These findings offer fresh insights into the theoretical and methodological development of ambidexterity research. The second essay investigates how product newness affects the product performance of new ventures in China. Building on the knowledge-based view and institutional theory, this research investigates the differential impacts of market and technological newness and how knowledge characteristics (i.e., breadth and tacitness) and institutional factors (i.e., legal inadequacy and environmental turbulence) moderate their performance impacts. Results from new high-tech ventures in China indicate that market newness has a stronger positive impact on product performance than technological newness. Moreover, the influence of technological newness on product performance is strengthened by market knowledge breadth or environmental turbulence, but weakened by market knowledge tacitness or legal inadequacy. In contrast, the link between market newness and new product performance is enhanced by market knowledge tacitness yet mitigated by environmental turbulence. These findings provide novel insights on the boundary conditions of product newness in new ventures’ product performance. The third essay explores how government policy affects firm innovation capability. While there is a sharp debate regarding the role of government intervention in economic development, empirical studies provide limited insights into specific mechanisms through which government policy influences firms’ innovation activities. This research investigates how government R&D spending affects the development and upgrading of firms’ innovation capability. Government R&D spending, on the one hand, facilitates the technical infrastructure construction and alleviates uncertainty in innovation search; on the other hand, it distorts the incentive and inhibits the spontaneous information spillovers among organizations, leading to an inverted U-shaped effect on innovation capability. This nonlinear relationship is further strengthened by the level of industrial competition and state ownership. The empirical analyses test and find strong support for the propositions using a longitudinal dataset of listed firms from 2009-2014 in China. The research findings provide a refined understanding of the role played by government in firms’ innovation activities and carry important managerial and policy implications.