ISSN: 1648 - 4460

International Journal of Scholarly Papers

VU KHF

Transformations  in
Business & Economics

Transformations in
Business & Economics

  • © Vilnius University, 2002-2018
  • © Brno University of Technology, 2002-2018
  • © University of Latvia, 2002-2018
Article
STATE CAPTURE AND TECHNOLOGICAL INNOVATION DURING INSTITUTIONAL TRANSITION: EMPIRICAL EVIDENCE FROM LISTED COMPANIES IN CHINA'S GROWTH ENTERPRISE MARKET
Chunmei Zhou

ABSTRACT. Innovation is an important driving force of economic development. The recognition of the influencing factors and mechanism of technological innovation aroused widespread concern in recent years. This study aims to recognize the key influencing factors of technological innovation of entrepreneurial firms and distinguish structural differences between different-sized firms in terms of influencing mechanism during institutional transition. This study used sample data of 120 listed companies in China's growth enterprise market (GEM) from 2010 to 2016. This study then analysed the state capture behaviours of China's local government and their impact on the technological innovation of entrepreneurial firms using panel regression. Results show that the charitable donations of entrepreneurial firms are significantly and negatively correlated with fiscal subsidies. This finding indirectly suggests that local governments are captured by entrepreneurial firms under the driving mechanism of "legal achievements in official career." Fiscal subsidies and organizational slack of captor firms play significantly positive interaction effect on technological innovation. Compared with large-sized firms, small-sized entrepreneurial firms mainly depend on organizational slack for technological innovation. The buffering powers of small firms against significant environmental changes are weakened to a certain extent. Therefore, the fiscal subsidy policies of entrepreneurial firms should be an important instrument that should be implemented by the Chinese government over a long period. In terms of selection of objects of fiscal subsidies, the local government should favour small-sized firms to facilitate sustainable development.

KEYWORDS:  state capture, entrepreneurial firm, fiscal subsidies, technological innovation.

JEL classification:  O38, O16, G34, D21, C33.

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Scholarly papers Transformations in Business & Economics
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