High-Tech Start-Up Innovation and the Role of Guanxi: An Explorative Study in China from an Institutional Perspective

This study explores the influences of institutions on high technology start-up innovation in China by taking into account both formal and informal institutions. Our research settings are two high technology parks in Wuxi and Shanghai, respectively. Drawing upon the theoretical lenses of North’s institutional framework and the guanxi literature, we propose an integrative framework to help understand the factors influencing high technology start-up innovation in China. By contrasting different formal institutional settings in Wuxi and Shanghai (in particular, local government interventions), our study shows the positive effect played by local government on innovation and the overarching influence of guanxi. Based on a qualitative research method, nine in-depth semi-structured interviews with the CEOs of high technology start-ups were conducted between August 2009 and September 2010. Additional interviews with government officials and managers of government-owned venture capital funds were performed. We offer evidence to support the dual influence of formal and informal institutions (guanxi). International guanxi triggers government intervention, which in turn facilitates the acquisition of local guanxi. As a multidimensional construct, guanxi has a positive influence on high technology start-up innovation. We contribute to the understanding of the effect of institutions on high technology start-up innovation by disentangling formal and informal institutions. Furthermore, government intervention may have a positive impact on high technology start-up innovation in China, which might shed some light on development in other emerging economies.