Effects of institutional support on innovation and performance: roles of dysfunctional competition

Purpose The purpose of this paper is to empirically investigate the effects of institutional support on product and process innovation and firm performance and describe how dysfunctional competition influences relevant outcomes. Design/methodology/approach This study develops a research model based on institution-based view and tests it using structural equation modeling and empirical data collected from 300 manufacturers in China. Findings The results show that institutional support positively affects product and process innovation and firm performance. Both product and process innovation improve firm performance. The findings reveal that dysfunctional competition significantly reduces the positive effects of institutional support on product and process innovation but leaves the effects of institutional support and product and process innovation on firm performance unaffected. Originality/value This study contributes to innovation literature by providing insights into the impact of China’s institutional environment on manufacturing firms’ product and process innovation decisions. The findings also contribute to institution-based view literature by providing empirical evidence on the joint effects of institutional support and dysfunctional competition on product and process innovation and firm performance. This study can help manufacturers in China take advantage of institutional environment and adjust product and process innovation decisions accordingly.