The Effect of Internal and External Factors on Innovative Behaviour of Chinese Manufacturing Firms

Business enterprises are playing a significant role in promoting China’s national capacity of innovation. However, information about China’s innovative activities is still very limited, especially at the micro level. This paper aims to investigate both the internal and external determinants that affect firms’ innovative behaviour by using a rich set of firm-level data and municipal-level data. It provides interesting insight into firms’ innovative behaviour embedded in different local systems. The analysis is based on a theoretical framework combining resource-based views (RBV) and the theory of regional innovation system (RIS). The findings in this study have important implications not only for China but also for the rest of the world as Chinese firms become increasingly active internationally.