The Role of the Government in the Knowledge Spillover Theory of Entrepreneurship: A Firm-Level Analysis

Despite the critical roles of knowledge filters and knowledge spillovers in the knowledge spillover theory of entrepreneurship (KSTE), the impact of knowledge filters on knowledge spillovers at the firm level remains underexplored. This article thus extends the KSTE to the firm level by directly investigating the effects of knowledge filters on knowledge spillovers (employee venturing behaviors) in incumbent firms. Moreover, based on the KSTE and institutional theory, we examine how regulatory institution (government support) and the enforceability of it (government transparency) moderate the effect of knowledge filters in incumbent firms on their employee venturing behaviors. We collect survey data from the Chinese pharmaceutical industry as it is knowledge intensive and entrepreneurially active by using a multi-informant method, that is, two senior managers from every responding company were interviewed on site by using structured questionnaires. To further minimize bias, we combine the survey data with provincial secondary data to test research hypotheses. Our findings reveal that the positive link between incumbent firms’ knowledge filters and employee venturing behaviors is enhanced by government policy support and government tax support. Furthermore, government transparency strengthens the moderating effect of government policy support whereas it weakens the moderating role of government tax support on the link between knowledge filters and employee venturing behaviors. Overall, this article explores the key proposition of the KSTE framework at the firm level, thus constructing the microfoundation of the KSTE, and substantiates the importance of integrating regulatory institutions into the firm-level KSTE.