Integrating the insights from both institutional theory and economic geography, we develop a new conceptual framework to explain how formal and informal institutions in developing countries influence knowledge exchanges within and across geographical locations, thus affecting entrepreneurs’ and firms’ innovative behaviors and outputs. We suggest that the prevalence of informal institutions in developing countries increases the importance of geographic proximity for knowledge exchanges. At the same time, informal institutions provide alternative channels for maintaining non-local social interactions that facilitate knowledge exchanges among geographically distant firms. Using China as the context, we provide theoretical propositions that illustrate these mechanisms in terms of the different innovative behaviors between domestic Chinese firms and multinational companies operating in China. This article provides a fresh perspective on how the geography of innovation is embedded in institutional environments. It enriches the literature by highlighting the important role of informal institutions in influencing innovation and how firms, especially entrepreneurial ones, vary their innovative behaviors depending on the extent of their embeddedness in the informal institutions.
Informal institutions, Geography of innovation, Knowledge spillovers, Non-local social interaction, Multinational enterprises (MNE), Entrepreneurship
Entrepreneurial and Small Business Operations | Technology and Innovation
Strategy and Organisation
Global Innovation and Entrepreneurship: Challenges and Experiences from East and West
Stephen E. Little, Frank M. Go, Teresa Shuk-Ching Poon
City or Country
GENG, Xuesong and HUANG, Kenneth G..
Informal institutions and the geography of innovation: An integrative perspective. (2016). Global Innovation and Entrepreneurship: Challenges and Experiences from East and West. 61-78. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5124
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