The impact of state shares on corporate innovation strategy and performance in China

This paper examines the impact of state shares on corporate innovation strategy and performance in the People's Republic of China (PRC). Through an investigation of 541 publicly traded companies in five high-tech industries during the period between 2000 and 2005, we find that the presence of state shares have a positive effect on the corporate choice of a process innovation strategy over a product innovation one. However, this relationship is moderated by the overall ownership concentration ratio. Moreover, our findings suggest that companies with large state shares prefer to conduct innovations independently rather than collaboratively with others, and they usually achieve better innovation performance. These findings indicate that the government play a role as both an investor and a resource allocation coordinator and therefore complicate the relationship between ownership structure and corporate innovation activities.