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Financial slack and the innovation behaviour of Chinese manufacturing firms: the moderating role of family ownership and digital transformation

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  • Qing Zhang
  • Na Tang
  • Zhizhou Xu

Abstract

This paper addresses whether financial slack influences the share of exploratory innovation in firms' innovation portfolio. Using the data of Chinese listed manufacturing firms over 2008-2021, we find that a higher level of financial slack leads to an increased share of exploratory innovation in firms' innovation portfolio. Further, we examine whether significant disparities exist between family firms and non-family firms in the effect of financial slack on the share of exploratory innovation, and find that the innovation portfolio of family firms shows less sensitiveness to the varying level of financial slack than non-family firms. Inconsistent with our prediction, digital transformation fails to unleash the potential of financial slack to trigger exploratory innovation. This paper contributes to depicting a more nuanced picture for the contingent impact of financial slack upon the composition of firms' innovation portfolio by uncovering the moderating roles of family ownership and digital transformation.

Suggested Citation

  • Qing Zhang & Na Tang & Zhizhou Xu, 2024. "Financial slack and the innovation behaviour of Chinese manufacturing firms: the moderating role of family ownership and digital transformation," International Journal of Manufacturing Technology and Management, Inderscience Enterprises Ltd, vol. 38(6), pages 468-493.
    • Handle: RePEc:ids:ijmtma:v:38:y:2024:i:6:p:468-493
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