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Financial marketization and corporate venturing in China: The impact of provincial-level institutions on the pharmaceutical sector

Weiqi Dai (School of Business Administration, Zhejiang University of Finance & Economics, Hangzhou, People’s Republic of China)
Ilan Alon (Rollins College, Winter Park, FL, USA)
Hao Jiao (Business School, Beijing Normal University, Beijing, People’s Republic of China)

Journal of Entrepreneurship in Emerging Economies

ISSN: 2053-4604

Article publication date: 2 March 2015

Abstract

Purpose

The paper aims to empirically examine the role of intra-national institutions in business performance. In particular, the article develops hypotheses regarding financial marketization and business venturing with organizational slack and political connections as moderating variables.

Design/methodology/approach

The authors choose listed firms from the pharmaceutical industry in China and focus on the period of 2001-2009. Results from the Hausman specification test indicate that the random effects model is appropriate for data. Because the dependent variable is dichotomous, the random effects logistic regression technique in Stata is used. To check the robustness of the estimation, the random-effects Tobit regression technique in Stata is also used. Overall, models are robust and statistically significant.

Findings

It was found that the level of regional financial sector marketization is positively associated with the likelihood of engaging in corporate venturing by firms within the region. Moreover, it was found that organizational slack significantly decreases the institutional influence on corporate venturing.

Originality/value

This study is one of the first to theorize and empirically test the impact of intra-national institutions on corporate venturing in China’s pharmaceutical industry. Institutions matter more when organizational slack is low. Firms in the pharmaceutical industry in China do not seem completely dependent on political connections for business venturing and use organizational slack to buffer against (adverse) institutional change.

Keywords

Acknowledgements

This research is supported by grants from National Natural Science Foundation of China (Project # 71202173; Project # 71132007). The financial support from the program of China Scholarship Council (201308330363) is also acknowledged.

Citation

Dai, W., Alon, I. and Jiao, H. (2015), "Financial marketization and corporate venturing in China: The impact of provincial-level institutions on the pharmaceutical sector", Journal of Entrepreneurship in Emerging Economies, Vol. 7 No. 1, pp. 2-22. https://doi.org/10.1108/JEEE-01-2015-0001

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited