Innovation in an Uncertain Institutional Environment: Private Software Entrepreneurs in Hangzhou, China

The thesis deals with innovation and entrepreneurship in China. Despite an institutional environment characterized by high levels of uncertainty, innovation thrives even in the technology-based sectors. The research asks for explanations how innovative capabilities are developed in such an adverse institutional environment. For analyzing the institutional environment the research relies on comparative institutional approaches while approaches from the capabilities and resource-based theories, innovation management and China studies are used for explaining the behaviour of firms. The thesis is based on 2 years of extensive field research in cooperation with 45 Chinese entrepreneurs and Zhejiang University in Hangzhou. The findings suggest that Chinese entrepreneurs develop particular innovative capabilities in response to particular technical, market and institutional opportunities and constraints. One of the key insights is that innovation, in a broad understanding, can take place in an environment with institutional uncertainty and limited formal protection of intellectual property rights. On the one hand, institutional uncertainty creates both restrictions and incentives for innovation, and, on the other hand, firms are able to develop specific innovative capabilities that manage sectoral constraints while fighting off institutional constraints.

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