IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v44y2023i2p1004-1019.html
   My bibliography  Save this article

The peer contagion effects and firms' innovation: Evidence from China

Author

Listed:
  • Xian Qin
  • Shiqiang Zhang
  • Xianchun Liao
  • Haitao Niu
  • Antony Dnes

Abstract

The existing researches on firms' innovation ignore the influence of peer firms; thus, this paper empirically examines the peer contagion effects of firms' innovation in China. The results indicate firms' innovation is significantly influenced by peers, and the macro‐marketization and meso‐industry competition promote the effects, whereas the micro firm managerial ability inhibits them. The study also finds the influence mechanism in breakthrough innovation and incremental innovation is different. Further prioritization tests reveal marketization, and industry competition prioritizes the effects over managerial ability. Our conclusions enrich literature on peer contagion effects, factors influencing innovation, and dual innovation theory.

Suggested Citation

  • Xian Qin & Shiqiang Zhang & Xianchun Liao & Haitao Niu & Antony Dnes, 2023. "The peer contagion effects and firms' innovation: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1004-1019, March.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:2:p:1004-1019
    DOI: 10.1002/mde.3727
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.3727
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.3727?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Philippe Aghion & John Van Reenen & Luigi Zingales, 2013. "Innovation and Institutional Ownership," American Economic Review, American Economic Association, vol. 103(1), pages 277-304, February.
    2. Mark T. Leary & Michael R. Roberts, 2014. "Do Peer Firms Affect Corporate Financial Policy?," Journal of Finance, American Finance Association, vol. 69(1), pages 139-178, February.
    3. Christopher A. Parsons & Johan Sulaeman & Sheridan Titman, 2018. "The Geography of Financial Misconduct," Journal of Finance, American Finance Association, vol. 73(5), pages 2087-2137, October.
    4. Yan, Qianhui & Zhu, Hongfei, 2020. "Peer influence on dividend policy: Evidence from the Chinese stock market," Economics Letters, Elsevier, vol. 192(C).
    5. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
    6. Adhikari, Binay K. & Agrawal, Anup, 2018. "Peer influence on payout policies," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 615-637.
    7. Cornaggia, Jess & Mao, Yifei & Tian, Xuan & Wolfe, Brian, 2015. "Does banking competition affect innovation?," Journal of Financial Economics, Elsevier, vol. 115(1), pages 189-209.
    8. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 1999. "Competition, Financial Discipline and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(4), pages 825-852.
    9. Albuquerque, Ana M. & De Franco, Gus & Verdi, Rodrigo S., 2013. "Peer choice in CEO compensation," Journal of Financial Economics, Elsevier, vol. 108(1), pages 160-181.
    10. David Hirshleifer & Angie Low & Siew Hong Teoh, 2012. "Are Overconfident CEOs Better Innovators?," Journal of Finance, American Finance Association, vol. 67(4), pages 1457-1498, August.
    11. Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2003. "The Social Multiplier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 345-353, 04/05.
    12. Machokoto, Michael & Gyimah, Daniel & Ntim, Collins G., 2021. "Do peer firms influence innovation?," The British Accounting Review, Elsevier, vol. 53(5).
    13. Grennan, Jillian, 2019. "Dividend payments as a response to peer influence," Journal of Financial Economics, Elsevier, vol. 131(3), pages 549-570.
    14. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
    15. repec:eme:mfppss:v:41:y:2015:i:7:p:714-733 is not listed on IDEAS
    16. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    17. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    18. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, vol. 80(3), pages 465-479, June.
    19. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 191-213.
    20. Geleilate, José-Mauricio G. & Magnusson, Peter & Parente, Ronaldo C. & Alvarado-Vargas, Marcelo J., 2016. "Home Country Institutional Effects on the Multinationality–Performance Relationship: A Comparison Between Emerging and Developed Market Multinationals," Journal of International Management, Elsevier, vol. 22(4), pages 380-402.
    21. Garry D. Bruton & David Ahlstrom & Han–Lin Li, 2010. "Institutional Theory and Entrepreneurship: Where Are We Now and Where Do We Need to Move in the Future?," Entrepreneurship Theory and Practice, , vol. 34(3), pages 421-440, May.
    22. Catherine M. Banbury & Will Mitchell, 1995. "The effect of introducing important incremental innovations on market share and business survival," Strategic Management Journal, Wiley Blackwell, vol. 16(S1), pages 161-182.
    23. Chen, Yi-Wen & Chan, Konan & Chang, Yuanchen, 2019. "Peer effects on corporate cash holdings," International Review of Economics & Finance, Elsevier, vol. 61(C), pages 213-227.
    24. Stephen P. Borgatti & Rob Cross, 2003. "A Relational View of Information Seeking and Learning in Social Networks," Management Science, INFORMS, vol. 49(4), pages 432-445, April.
    25. Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn.
    26. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    27. Peter Demerjian & Baruch Lev & Sarah McVay, 2012. "Quantifying Managerial Ability: A New Measure and Validity Tests," Management Science, INFORMS, vol. 58(7), pages 1229-1248, July.
    28. Gautam Ahuja & Curba Morris Lampert, 2001. "Entrepreneurship in the large corporation: a longitudinal study of how established firms create breakthrough inventions," Strategic Management Journal, Wiley Blackwell, vol. 22(6‐7), pages 521-543, June.
    29. Xia, Li & Gao, Shuo & Wei, Jiuchang & Ding, Qiying, 2022. "Government subsidy and corporate green innovation - Does board governance play a role?," Energy Policy, Elsevier, vol. 161(C).
    30. Laurent Frésard & Philip Valta, 2016. "How Does Corporate Investment Respond to Increased Entry Threat?," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 5(1), pages 1-35.
    31. Donbesuur, Francis & Ampong, George Oppong Appiagyei & Owusu-Yirenkyi, Diana & Chu, Irene, 2020. "Technological innovation, organizational innovation and international performance of SMEs: The moderating role of domestic institutional environment," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    32. Liu, Sibo & Wu, Dejun, 2016. "Competing by conducting good deeds: The peer effect of corporate social responsibility," Finance Research Letters, Elsevier, vol. 16(C), pages 47-54.
    33. Kaustia, Markku & Rantala, Ville, 2015. "Social learning and corporate peer effects," Journal of Financial Economics, Elsevier, vol. 117(3), pages 653-669.
    34. Chen, Yangyang & Podolski, Edward J. & Rhee, S. Ghon & Veeraraghavan, Madhu, 2014. "Local Gambling Preferences and Corporate Innovative Success," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(1), pages 77-106, February.
    35. Chen, Yangyang & Podolski, Edward J. & Veeraraghavan, Madhu, 2015. "Does managerial ability facilitate corporate innovative success?," Journal of Empirical Finance, Elsevier, vol. 34(C), pages 313-326.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Machokoto, Michael & Gyimah, Daniel & Ntim, Collins G., 2021. "Do peer firms influence innovation?," The British Accounting Review, Elsevier, vol. 53(5).
    2. Hsu, Yuan-Teng & Huang, Chia-Wei & Koedijk, Kees G., 2023. "Unintended consequences of compensation peer groups on corporate innovation," Journal of Corporate Finance, Elsevier, vol. 78(C).
    3. Su, Zhifang & Wang, Luhan & Liao, Jing & Cui, Xin, 2023. "Peer effects in corporate advertisement expenditure: Evidence from China," Research in International Business and Finance, Elsevier, vol. 64(C).
    4. Chien Chi Chu & Xiu‐Fen Su & Yu‐En Lin & Akihiro Omura & Bin Li & Adrian Wai‐Kong Cheung, 2023. "Love thy neighbour: Evidence from capital structure decisions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 2907-2933, September.
    5. Gyimah, Daniel & Machokoto, Michael & Sikochi, Anywhere (Siko), 2020. "Peer influence on trade credit," Journal of Corporate Finance, Elsevier, vol. 64(C).
    6. Machokoto, Michael & Chipeta, Chimwemwe & Ibeji, Ngozi, 2021. "The institutional determinants of peer effects on corporate cash holdings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
    7. Ali-Rind, Asad & Boubaker, Sabri & Jarjir, Souad Lajili, 2023. "Peer effects in financial economics: A literature survey," Research in International Business and Finance, Elsevier, vol. 64(C).
    8. Chen, Mingqin & Xie, Jing & Li, Yue, 2022. "Heterogeneity of dividend smoothing: A strategic response to peer competition in China," Pacific-Basin Finance Journal, Elsevier, vol. 76(C).
    9. Liang, Quanxi & Li, Qiumei & Lu, Meiting & Shan, Yaowen & Wang, Peipei, 2024. "Peer effects on corporate environmental protection: Competition, information cascades or career concerns?," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    10. Jiali Liu & Xinran Xie & Yu Duan & Liang Tang, 2023. "Peer effects and the mechanisms in corporate capital structure: evidence from Chinese listed firms," Oeconomia Copernicana, Institute of Economic Research, vol. 14(1), pages 295-326, March.
    11. Panagiotis Karavitis & Pantelis Kazakis & Tianyue Xu, 2022. "CFO Working Experience and Tax Avoidance," Working Papers 2022_14, Business School - Economics, University of Glasgow.
    12. Hui Zhao & Ao Lei & Yuhui Li & Dingjun Hong, 2023. "The Sectoral and Regional Peer Influences on Heavy-Pollution Corporate Environmental, Social, and Governance Performance," Sustainability, MDPI, vol. 15(17), pages 1-42, August.
    13. Zhao, Tianjiao & Wang, Hanyu, 2024. "The industry peer effect of enterprise ESG performance: the moderating effect of customer concentration," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1499-1525.
    14. Seo, Hojun, 2021. "Peer effects in corporate disclosure decisions," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    15. Chen, Fengwen & Wang, Bing & Wang, Wei & Hu, Chen, 2024. "The secret of imitating wrongdoing: Accidental or deliberate," Research in International Business and Finance, Elsevier, vol. 69(C).
    16. Chronopoulos, Dimitris K. & Johari, Edie Erman Che & Scholtens, Bert & Sobiech, Anna L. & Wilson, John O.S. & Yilmaz, Muhammed H., 2023. "Competition and bank dividends," Journal of International Money and Finance, Elsevier, vol. 137(C).
    17. Wang, Peiwen & Chen, Minghua & Wu, Ji & Yan, Yuanyun, 2023. "Do peer effects matter in bank risk? Some cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    18. Francis, Bill & Hasan, Iftekhar & Mani, Sureshbabu & Ye, Pengfei, 2016. "Relative peer quality and firm performance," Journal of Financial Economics, Elsevier, vol. 122(1), pages 196-219.
    19. Shen, Xieyang & Yang, Sijie & Chen, Yulin & Zeng, Jianyu, 2022. "How does economic policy uncertainty influence managers' learning from peers' stock prices? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    20. Xiaoran Huang & Zheng Qiao & Lei Zhang, 2021. "The real effects of institutional spatial concentration," Financial Management, Financial Management Association International, vol. 50(4), pages 1113-1167, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:44:y:2023:i:2:p:1004-1019. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.