Transformations  in
Business & Economics

DOES THE INSTITUTIONAL ENVIRONMENT AFFECT THE FAILED TECHNOLOGICAL INNOVATION IN FIRMS? EVIDENCE FROM LISTED COMPANIES IN CHINA'S PHARMACEUTICAL MANUFACTURING INDUSTRY
Zhuang Xiong, Jianmu Ye, Pengju Wang

ABSTRACT. The failed technological innovation in firms exists objectively. The traceability of failed technological innovation is attracting the attention of both theoretical and practical circles. However, existing studies focus on the causes of technological barriers and neglect the uncertainty of the external environment. To explore the influence of institutional environment on the failed technological innovation, the impacts of the institutional environment on the failure of technological innovation in firms were analyzed from three aspects, including government intervention, financial development, and legal environment.
The multiple linear models and the data of companies listed in China's pharmaceutical manufacturing industry from 2008-2014 were utilized. Results show that an inverted-U relationship exists between government intervention and failed technological innovation and that excessive government intervention increases the risk of technological innovation. Financial development has a significant negative impact on failed technological innovation. A higher level of regional financial development corresponds to a lower impact of government intervention on failed technological innovation. Moreover, an improved legal environment has a more obvious effect on failed technological innovation in state-owned firms than non-state-owned firms in terms of significantly reducing the failure probability. Overall, the findings of this study are significant in further improving the fault-tolerance environment in technological innovation and reducing the risk of technological innovation

KEYWORDS:  institutional environment, failed technological innovation, government intervention, financial development, legal environment.

JEL classification:  M13, O32, O33, O38.