We study the impact of formal and informal institutions perceived and experienced by firms on their innovation using the 2012 World Bank Enterprise Survey data in China. We propose a framework to identify different innovator types of firms. Our analysis shows that (1) perceived constraints from the governmental system make firms more likely to be innovators than non-innovators; (2) perceived constraints from the legal system make firms more likely to be imitators than innovators; (3) lack of formal finance makes firms more likely to be non-innovators than innovators; (4) prevalence of bribery makes firms more likely to be non-innovators than innovators but less likely to be innovation pretenders than innovators. Our study enriches institutional theory and innovation research by establishing a framework that encompasses multiple dimensions of formal and informal institutions perceived and experienced by firms and the impacts of such perception and experience on firms’ propensity to become certain type of innovator.

Given the rapid economic and administrative evolution that China has undergone during the last three decades, it is likely that corruption in China has been directly and indirectly affected by the changes that have taken place. However, the existing literature pays little attention to the impact of such changes on Chinese corruption, while emphasizing the seriousness of corruption. This article reviews how the major causes of Chinese corruption in the reform era have been alleviated in the 2000s. Some of the recent changes include the progress of the market economy, the advent of a merit-based civil service system, improvement of the budgeting and auditing system, fiscal recentralization and better monitoring of local governments' activities, and progress in anti-corruption regulation and enforcement. Consequently, we hypothesize that changes in the causes of corruption have led to structural changes in Chinese corruption. Our empirical analyses reveal that administrative reform has resulted in a decrease in the number of corruption cases related to the internal administrative process (embezzlement and misappropriation of public funds). At the same time, we also observe the aggravation of bribery. This suggests that Chinese corruption has made a transition from being an administrative issue to being a private–public transactional problem.