Unions and firm innovation in China: Synergy or strife?

The 'monopoly face' of unions suggests that the rent-seeking activities of unions discourage research and development investment and that the collective bargaining rules may restrict management flexibility, thus deterring innovations. On the other hand, the arrival of unions in the workplace may 'shock' the management into adopting more systematic rather than ad hoc management practices and that such innovative workplace practices may enhance an organization's ability to introduce new products and/or new processes. Further, the 'voice face' of unions argues that the independent 'questioning' of the management deliberations by the unions can also lead to better, more creative and, hence, more productive solutions. This paper investigates the link between unions and firm innovations in China. Different from their counterparts in advanced economies, Chinese unions are found to encourage firm innovations and R&D investment.

► We study how unionization affects firm innovation in China. ► Chinese unions have too weak bargaining power to capture quasi-rents from innovation. ► Chinese unions do play a direct and important role in firm innovation activities. ► The empirical results show a positive impact of unions on firm innovation.