The bright and dark sides of institutional intermediaries: Industry associations and small-firm innovation

• Published in: Research policy Vol. 51; no. 1; p. 104370
• Main Authors: Yao, Nengzhi(Chris), Guo, Qiaozhe, Tsinopoulos, Christos
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.01.2022
• Subjects: Industry association; Institutional development; Institutional intermediary; Institutional linkages; Political intervention; Tax benefits; Institutional development; Tax benefits; Institutional linkages; Industry association; Institutional intermediary; Political intervention
• ISSN: 0048-7333
• DOI: 10.1016/j.respol.2021.104370

•We show that institutional intermediaries can positively and negatively affect firm innovativeness.•Firms’ institutional linkages (linkages with institutional intermediaries) can indirectly foster firm innovativeness, which is achieved through obtaining more government support (in the form of tax benefits).•Firms’ institutional linkages can indirectly impede firm innovativeness, which is achieved by making them subject to more political intervention.•The effect of institutional linkages on political interventions is reduced for firms located in better institutional environments. Institutional intermediaries are often seen by governments as avenues for increasing firm level innovativeness. This is because they can provide both information and legitimacy, which enable access to government support. Yet, close engagement with intermediaries may also encourage political intervention, especially in the context of emerging markets. Using a unique dataset which consists of the Chinese Micro- and Small- Enterprise Survey (CMES) and the National Economic Research Institute (NERI), we explore the roles of government support and political intervention in the relationship between institutional linkages and firm innovativeness. We find that government support, in the form of tax benefits, and political intervention mediate the relationship between institutional linkages and firm innovativeness. We also find that this relationship is contingent upon the degree of institutional development within which firms operate. Our findings therefore contribute to the burgeoning literature that examines the effects of institutional intermediaries on innovation by exploring both their bright and dark sides. We discuss the implications of these findings for institutional intermediary research, institutional theory and innovation literature and offer advice to policymakers and managers looking at improving innovativeness.