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Ownership concentration and product innovation in Chinese private SMEs

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Abstract

Product innovation is extremely important to the growth, success, and ultimate survival of firms. Although its unique features in small and medium-sized enterprises (SMEs) have gained growing attention in the literature, there is limited knowledge as to how ownership concentration moderates the relationship between product innovation and its determinants. Based upon insights from agency and institutional theories, we examine the moderating effects of ownership concentration on the relationship between product innovation and its key determinants in Chinese SMEs, utilizing a large dataset of 43,728 Chinese firms over the period 2005–2006. We focus on examining the differences between single-owner SMEs, where there is dominant control of one family member, and multiple-owner SMEs, where principal-agent conflicts and principal-principal conflicts are more likely to occur. Our findings indicate that single-owned firms tend to convert research and development into product innovation more efficiently than firms with multiple owners, who are typically better at utilizing external sources of knowledge and human capital.

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Notes

  1. These studies indicate that over 90 % of SMEs in China are family-owned.

  2. This way of defining SMEs is suggested by the NBS. “Small-sized enterprises” refer to those firms with less than 30 million RMB in sales, 40 million in total assets, or fewer than 300 employees.

  3. Relying on linear model estimates would result in negative fitted values, which deviate from the actual values of liabilities (i.e., zero) and cause estimation bias (Wooldridge, 2003: 565).

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Authors and Affiliations

  1. School of Business, Renmin University of China, Haidian District, Beijing, 100872, China

    Ziliang Deng

  2. Nottingham University Business School China, The University of Nottingham Ningbo China, 199 East Taikang Road, Ningbo, 315100, China

    Peter S. Hofman & Alexander Newman

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  1. Ziliang Deng
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  2. Peter S. Hofman
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  3. Alexander Newman
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Correspondence to Alexander Newman.

Additional information

This research was sponsored by the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (10XNK135). The authors are grateful to the constructive comments received from the seminar participants at Renmin University of China in Beijing on May 25, 2010, APJM Special Issue guest editors (Yuan Lu, Kevin Au, Erming Xu, and Mike Peng), and audience members of the APJM Special Issue Conference in Beijing on July 9, 2011.

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Deng, Z., Hofman, P.S. & Newman, A. Ownership concentration and product innovation in Chinese private SMEs. Asia Pac J Manag 30, 717–734 (2013). https://doi.org/10.1007/s10490-012-9301-0

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