Institutional Change, Marketization and Entrepreneurial Strategies

Institutions influence the behavior of individuals and firms, but we lack an understanding of what types of institutional environment favor which types of venture strategies. Exploiting regional disparity in institutional development during China’s economic transition, this paper examines the impact of institutional change on the effectiveness of venture strategies. Using data from a novel survey of 254 firms founded by alumni of Tsinghua University in China, we find that early in the development of market-oriented institutions, government ties promote venture growth. In a more marketized environment, innovative firms tend to outperform. During the intermediary stage of marketization, locating in science parks contributes to venture growth. We conceptualize science parks as a type of “cocoon” institution that protects ventures by facilitating both government tie formation and innovation. Our findings imply a need to further consider the institutional environment and specifically the extent that policies, ...