Industry association networks, innovations, and firm performance in Chinese small and medium-sized enterprises

- R&D and technology staffs have a positive effect on innovation at Chinese SMEs.
- Participation in industry association networks can improve firm innovation.
- Innovation is found to have a positive effect on firm performance.
- Membership in industry association networks can improve firm efficiency.

This study uses panel data analysis to examine the effects of membership in industry association networks on innovation and firm performance in Chinese small and medium-sized enterprises (SMEs) listed on the Shenzhen Stock Exchange Small and Medium-size Enterprises Board from 2007 to 2011. There are several interesting findings. First, research and development (R&D) and technology staff have a positive and significant effect on innovation at SMEs. Second, participation in industry association networks (defined as comprising business association networks and technology association networks) can improve firm innovation at Chinese SMEs. Third, innovation is found to have a positive effect on firm performance at SMEs. Finally, membership in industry association networks can improve firm efficiency and increase non-operating income but at the expense of higher management costs at SMEs. Our study has important policy implications for policymakers and SMEs in China.