Comparing the Effects of Corporate Strategic Deviance on Corporate Growth and Corporate Profit: Evidence from Chinese Firms

Abstract

Corporate strategic deviance plays an essential role in the survival and development of enterprises; however, does it have the same impact on all types of goals (corporate growth and corporate profit)? Using Chinese listed companies from 2010 to 2018, we address this question by examining the influence of corporate strategic deviance on corporate growth and corporate profit. The results show that corporate strategic deviance has a positive effect on corporate growth; the institutional environment strengthens the positive relationship between corporate strategic deviance and corporate growth; the relationship between corporate strategic deviance and corporate profit is a U-shaped function; and the U-shaped relationship between corporate strategic deviance and corporate profit becomes weaker when companies in developed institutional environments. Our research moves beyond the debate about whether corporate strategic deviance increases or decreases corporate performance by analyzing the effect of corporate strategic deviance on different corporate goals in China, the results are helpful to understand the inconsistent conclusions of existing research. In addition, our study enriches the situational theory of corporate strategic deviance that affects corporate growth and profit by introducing the institutional environment as a moderating variable.