The impact of China's national system of innovation on bottom-up learning for innovation in firms : case studies of China's automobile and railway equipment sectors

Existing National System of Innovation (NSI) literature mainly focuses on the impact of NSI on national-level or sectoral-level innovations. Whether and how NSI impacts firm-level innovation still lacks comprehensive theoretical exploration. This study aims to address the knowledge gap by developing a theoretical framework to analyse and evaluate how two aspects of institutions in China’s NSI might contribute to the development of a firm’s innovation through bottom-up learning (BUL). The two aspects of institutions in focus are corporate governance and the firm’s access to capital. This research adopts a multiple case study method. 37 in-depth interviews in seven leading firms in China’s automobile and railway equipment sectors were carried out. The case samples included central State-Owned Enterprises (SOEs), local SOEs and private firms. The author performed multiple case analyses to identify and examine the impact of corporate governance along with the firm’s access to capital, and how these factors influence the likelihood of the firm’s adoption of BUL practices. This study fills the research gap in three ways. First, by expanding the Corporate Governance and Financial (CG&F) framework by Tylecote and colleagues (Tylecote and Conesa, 1999) this study establishes how NSI shapes a firm’s BUL choices for innovation depending on four institutional factors: (1) whether the top manager of a firm is an insider or outsider, (2) the length of employment of the top manager, (3) the firm’s access to capital, and (4) the level of competition faced by the firm. Second, based on the analysis of the above four factors, a new finding is that central and local SOEs should be separately considered because the institutional conditions they face for BUL for innovation are different. Third, to support the analysis between NSI and BUL, the study operationalises the concept of BUL by systematically introducing five underlying practices.