When Government Support Sparks Renewal: How Entrepreneurship Drives Firm Success

What is it about?

This study examines how government institutional support boosts firm performance through two internal mechanisms: entrepreneurial orientation (EO) and strategic renewal. Grounded in strategic management and institutional theory, it argues that EO—reflecting innovation, proactiveness, and risk-taking—translates government support into renewal. Renewal, through updated strategies and operations, enables firms to adapt and sustain advantage. Together, EO and renewal convert institutional backing into stronger performance. Using survey data from Chinese firms, the study finds that EO and strategic renewal both mediate the link between government support and firm performance. Supportive policies, stable regulations, and public resources foster an entrepreneurial mindset and renewal efforts, helping firms turn external aid into lasting success. When institutional backing is weak, however, firms struggle to sustain renewal and competitiveness, even with strong entrepreneurial intent. The findings demonstrate that external institutional resources and internal entrepreneurial capabilities must work in tandem to drive long-term success. In China’s evolving market system, government support provides the foundation for entrepreneurial development, while EO and strategic renewal determine how effectively firms capitalize on that foundation. Managers should therefore integrate public incentives with internal innovation efforts, ensuring that both mechanisms operate cohesively to sustain firm growth and adaptability.

Featured Image

Photo by kuaileqie RE on Unsplash

Photo by kuaileqie RE on Unsplash

Why is it important?

This research is unique in identifying entrepreneurial orientation and strategic renewal as dual mediating mechanisms linking government institutional support to firm performance. It contributes to both institutional and entrepreneurship research by showing how external support is translated into performance through interconnected internal processes of innovation and renewal. The study clarifies that institutional advantages only yield results when firms build internal systems that continually refresh strategic direction and entrepreneurial drive. The study is particularly timely as China continues to emphasize innovation-led economic transformation. It provides actionable insights for both managers and policymakers: firms should strengthen EO and renewal capabilities to make full use of institutional resources, while policymakers should ensure that government support fosters—not replaces—entrepreneurial initiative. Together, these efforts create a synergistic system where supportive institutions and entrepreneurial renewal jointly sustain firm competitiveness and growth.