This research explores the relationship between firm ownership and the adoption of innovative corporate strategies. We also study the related relationship between innovation and firm financial performance. Innovation and resulting financial outcomes are critical to organizational survival and competitive advantage, particularly during rapid environmental change. We take advantage of China's economic transition to study the role that ownership plays in the innovation process. We ask three fundamental questions about ownership and innovation: 1. How does ownership structure affect the adoption of an innovative, general firm strategy? 2. What were the predominant strategic clusters that emerged during China's transition? 3. What effect does the firm's general strategy have on financial performance and efficiency?
Empirically, we investigate differences between Chinese state owned enterprises (SOEs) and collective enterprises and other nonstate firms (CNFs) in the adoption of a general firm strategy during transition. We are analyzing data from 1994-1999 on 800 firms to test our hypotheses. Our research findings will improve scholarly understanding of the process by which firms adopt innovative strategies during a fundamental transformation of institutional constraints, and it will provide insight into the effect that innovation has on firm outcomes. This research will also inform organizational decision making regarding innovation, particularly during periods of significant environmental change.
