Centralization and innovation performance in an emerging economy: testing the moderating effects

Previous research examining the relationship between centralization and innovation performance has suggested conflicting views and mixed results. Drawing on the knowledge-based view, this study identifies two mechanisms underlying the relationship between centralization and innovation performance: information flow and behavior change of organizational members. We argue that the relationship between centralization and innovation performance can be positively moderated if the constrained information flow can be compensated, or the undermined motivation of employees can be adjusted, or both information and behavior drawbacks can be mitigated. With a sample of Chinese high-tech firms, we find that a positive relationship between centralization and innovation performance is more likely to occur if the firm owns higher-level human capital, charismatic leadership or entrepreneurial orientation. These findings shed light on the debate concerning when centralization enhances innovation performance and provide managerial implications for firms in emerging economies.