High Risk, Low Return (and Vice Versa): The Effect of Product Innovation on Firm Performance in a Transition Economy

Common wisdom suggests that high-risk strategies will be associated with high expected returns, and vice versa. Focusing on the effect of new-product development on firm performance, in this paper we argue that this relationship may reverse in a market undergoing substantial institutional transition. We examine domestic pharmaceutical firms in China during the 1990s and find that, in this context, introducing new products was associated with...