This study integrates different research streams in the institutional literature to examine the impact of general and specific government policies on an organization’s explorative and exploitative innovation in China. Based on resource dependence theory, we argue that general government policy promotes a firm’s exploitative innovation only while specific government policy promotes explorative innovation. However, the simultaneous presence of both forms of policy can “crowd out” a general policy’s effect on a firm’s exploitative innovation efforts. The institutional environment including innovation norms and unique organizational characteristics including firm’s ownership structure can also affect efforts to inspire innovation. Results based on a combination of survey and archiva...[ Read more ]

This study integrates different research streams in the institutional literature to examine the impact of general and specific government policies on an organization’s explorative and exploitative innovation in China. Based on resource dependence theory, we argue that general government policy promotes a firm’s exploitative innovation only while specific government policy promotes explorative innovation. However, the simultaneous presence of both forms of policy can “crowd out” a general policy’s effect on a firm’s exploitative innovation efforts. The institutional environment including innovation norms and unique organizational characteristics including firm’s ownership structure can also affect efforts to inspire innovation. Results based on a combination of survey and archival data collected from Chinese firms support the argument. Implications for institutional theories and the role of government in firm innovation are discussed.