Innovative Climate, a Determinant of Competitiveness and Business Performance in Chinese Law Firms: The Role of Firm Size and Age

In the past few decades, a firm’s innovative climate has received much attention in the context of innovative behavior, competitiveness, and business performance. The existing literature has relied to a great extent on innovative climate as an interacting factor and overlooked its role as an antecedent of various organizational phenomena. Furthermore, the interaction effects of the firm’s size and age on the relationships between innovative climate and other organizational variables have gone unnoticed. This study adds to the literature by empirically assessing the effects of the firm’s innovative climate on organizational learning and employees’ innovative behavior as well as its consequences on the firm’s competitiveness and business performance. Additionally, it addresses the interaction impacts of firm size and age on the relationships between the abovementioned variables. This research achieves its goal by developing an integrative research design that analyzes complex relations using covariance-based structural equation modeling (SEM) and regression techniques on a dataset of 408 Chinese law firms. The results indicate that the firm’s innovative climate has a significant positive relationship with organizational learning and employees’ innovative behavior. It is also found that organizational learning has a significant positive influence on employees’ innovative behavior. Meanwhile, organizational learning and employees’ innovative behavior have a significant positive influence on firm competitiveness and business performance. Another important finding is that contextual factors, i.e., firm size and age, strengthen these relations. Theoretical and managerial implications, including links to firm size and age, are provided.