Entrepreneurial Control and Breakthrough Innovation: Evidence from High-Tech Firms in China

Abstract

The 2024 amendment to China’s Company Law signals a growing institutional embrace of founder-centric governance. Using a panel of Chinese A-share listed high-tech firms from 2008 to 2022, we examine how entrepreneurial control, defined as sustained founder ownership and active governance involvement, influences breakthrough innovation. Breakthroughs are identified based on SBERT-based embeddings of patent texts. Our findings reveal that entrepreneurial control significantly enhances breakthrough innovation. We identify resource mobilization, risk-taking behaviors, internal control, and long-term orientation as four plausible underlying mechanisms. Heterogeneity analyses show a more pronounced effect with proactive government and effective market, and with more AI exposures and external technological sanctions. Further analyses consider variation along founder composition, team structure, demographic traits, and temporal dynamics. Overall, this study reconceptualizes entrepreneurial control as a governance capacity that institutionalizes strategic agency, advancing a Schumpeterian understanding of how concentrated authority in organizational continuity can serve as a structural engine of innovation.

Keywords: entrepreneurial control, breakthrough innovation, high-tech firms, China's Company Law