The innovation gap is closing: Chinese state-owned enterprises’ mechanisms for developing innovative solutions

Purpose State-owned enterprises (SOEs) play an immense role throughout the world. Historically lacking in innovativeness, SOEs are now compelled to be more innovative. This study aims to explore the innovative tendencies of SOEs and non-SOEs as they strive to be preferred suppliers to their key accounts. This study also examines the effects of top management involvement (TMI) and customer knowledge utilization on suppliers’ tendencies to provide innovative solutions to key customers. In addition, this study examines the moderating effects of state ownership on these relationships. Design/methodology/approach Following institutional theory and dynamic capabilities logic to guide expectations, this study collected survey responses from 185 managers at SOEs and non-SOEs in Beijing, Shanghai, Guangzhou and Shenzhen in China. Using partial least squares structural equation modeling, this study examined main and moderating effects of variables on innovation. Findings Results indicate that state ownership does not have a significant effect on innovation, suggesting Chinese SOEs may no longer be innovation-disadvantaged vis-à-vis non-SOEs. In addition, both TMI and customer knowledge utilization have positive effects on innovation. The hypothesized magnifying effect of state ownership on TMI’s main effect is not present. Data support our expectation that state ownership amplifies the positive effect of customer knowledge utilization on innovation. Research limitations/implications Our research provides evidence that China’s SOEs are closing the competitive gap in innovation and mechanisms for this occurrence. The relatively small sample from limited geographies necessitates research in more regions of China. Also, research should investigate not just the ownership type of suppliers, but also of buyers. Originality/value This study offers unique insights into factors affecting the innovative tendencies of Chinese SOEs and non-SOEs. Until now, little research has addressed what practices SOEs use to provide more innovative solutions to customers.