Does Institutional Change in Universities Influence High-Tech Entrepreneurship? Evidence from China’s Project 985

Abstract

T his paper contributes to institutional theory on cognitive and normative institutional change targeted at altering beliefs, behaviors, and ultimately firm performance. Prior work emphasizes institutional changes where the ideas and beliefs originate from those within the institutional context. Under examined are cases of institutional changes in beliefs and behaviors imposed from outside of the context, which may result in inconsistencies among cognitive, normative, and regulatory institutional pillars. Project 985 was a program implemented by the Chinese government that provided funding for a set of universities to build new research centers. We found that graduates of these universities subsequently expressed greater beliefs in innovation and founded more high-tech ventures, but that entrepreneurs influenced by the reform were not as financially successful as entrepreneurs who founded firms before the reform or from non-985 universities. We explain this surprising finding as caused by the fact that Project 985 was institutionally inconsistent with China's broader institutional environment. An important implication is that institutional changes may alter beliefs and behavior, but they must be consistent with the broader institutional environment to improve firm performance.

How entrepreneurs leverage institutional intermediaries in emerging economies to acquire public resources

“…Local elites are often well educated in top domestic universities, particularly in science and engineering (Hoskisson et al, ) as governments often cultivate such talent through major infrastructure investments. For example, China's Project 985 improved leading universities, and explicitly attempted to change students' attitudes and improve their skills regarding technical innovation (Eesley, Li, and Yang, ). We see such actions across China and elsewhere in emerging economies where local elites are typically educated in leading domestic universities and take rigorous science or engineering curricula.…”

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“…For instance, they show that science commercialization, in terms of university spin-off firms performing well, can influence the performance of the university in terms of higher research income [34]. Similarly, institutional changes at the university level may alter individuals' beliefs and behaviors [35]. Yet, to generate positive outcomes, such changes need to be consistent with the broader institutional environment to which individuals and firms are exposed.…”

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“…Studies have also addressed the impacts across levels of analysis, for instance, Pitsakis et al () use the science commercialization context to look at how a specific organizational‐level outcome (i.e., performance of university spin‐offs) influences performance at a different level of analysis (i.e., university research income). Similarly, Eesley et al () emphasize how institutional changes may alter individuals’ beliefs and behaviours. Yet, to generate positive outcomes, such changes need to be consistent with the broader institutional environment to which individuals and firms are exposed to.…”