Radical innovation is crucial for firms to gain a competitive edge by transforming existing markets or creating new ones. However, its high failure rate necessitates understanding the factors contributing to its success. Entrepreneurial orientation (EO), reflecting a firm's innovativeness, proactiveness, and risk-taking, is recognized as a key driver of firm innovation. Despite this, research specifically focusing on EO's relationship with radical innovation remains limited. This study addresses this gap by exploring how EO influences radical innovation and examining the moderating roles of board characteristics. The authors argue that a firm's board, as a key corporate governance mechanism, significantly influences the translation of EO into radical innovation due to its direct involvement in strategic decision-making and resource allocation. This study uses the context of listed manufacturing firms in China to examine this relationship, addressing the limited research on internal factors affecting the transformation of EO into tangible innovation outcomes.

The literature review establishes the importance of radical innovation for firm performance and the role of entrepreneurial orientation as a driver of innovation. However, it highlights a gap in research specifically examining the relationship between entrepreneurial orientation and radical innovation. Existing studies have explored various drivers of radical innovation, including organizational capabilities, firm knowledge, leadership styles, and strategic orientations, but the focus on entrepreneurial orientation's direct impact on radical innovation has been insufficient. The paper also notes a lack of research into the moderating role of corporate governance, particularly the board's characteristics, in this relationship. This omission is significant because the board's role in strategic decision-making and resource allocation can significantly impact the transformation of entrepreneurial orientation into successful radical innovation. The paper uses the existing literature on corporate governance and its impact on strategic decision making to propose that the board's characteristics can act as crucial moderators in the relationship between EO and radical innovation.

The study employs panel data from 1620 listed Chinese manufacturing firms from 2013 to 2019. Data on radical innovation (measured by the natural logarithm of the number of invention patent applications plus one) is collected from CSMAR, CNRDS, and Wind databases. Entrepreneurial orientation is measured following Williams and Lee (2009), using a composite score derived from R&D investment and investment activities net cash flows relative to sales revenue. Board characteristics include CEO duality (dummy variable), board independence (percentage of independent directors), board ownership (directors' shareholding percentage), and board size (number of directors). Control variables such as firm size, age, growth, state ownership, leverage, and ownership concentration are included. The authors use a fixed effects regression model to test the hypotheses and conduct robustness checks by lagging the dependent variable for two years and removing the data for 2018 and 2019. This methodology addresses potential issues of endogeneity and time-specific events that might affect the observed relationship.

The empirical analysis reveals a significant positive relationship between entrepreneurial orientation and radical innovation, supporting Hypothesis 1. This finding is robust across various model specifications. The results also show that board characteristics significantly moderate the relationship. CEO duality (Hypothesis 2) and board independence (Hypothesis 3) positively moderate the relationship, indicating that these board compositions enhance the positive effect of entrepreneurial orientation on radical innovation. Conversely, board ownership (Hypothesis 4) and board size (Hypothesis 5) negatively moderate the relationship, suggesting that higher board ownership and larger board sizes weaken the link between entrepreneurial orientation and radical innovation. These findings are supported by graphical representations of the interaction effects using the Aiken et al. (1991) approach. Robustness tests, involving a two-year lag of the dependent variable and removal of data from 2018 and 2019, confirm the consistency and reliability of the results.

The findings support the argument that entrepreneurial orientation fosters radical innovation. The paper elaborates on three key mechanisms: motivational (stronger desire to innovate), opportunity (faster identification of opportunities), and ability (better handling of uncertainty). The moderating effects of board characteristics underscore the importance of managing entrepreneurial orientation effectively. The positive moderating effects of CEO duality and board independence suggest that strong, unified leadership and access to diverse perspectives and resources facilitate the transformation of EO into radical innovation. In contrast, the negative moderating effects of board ownership and board size might be attributed to potential agency costs and coordination challenges in larger boards, hindering decision-making and resource allocation for radical innovation initiatives. The asymmetric moderating roles of board characteristics highlight the need for a balanced approach in board composition to maximize the benefits of entrepreneurial orientation for radical innovation.

This study demonstrates the significant positive impact of entrepreneurial orientation on radical innovation and reveals the asymmetric roles of board characteristics in shaping this relationship. The findings suggest that firms should cultivate entrepreneurial orientation, adopt a CEO duality structure, and increase board independence while simultaneously controlling board ownership and board size to effectively translate EO into radical innovation. Future research could explore alternative measures of radical innovation, examine mediation mechanisms linking EO to radical innovation, consider additional corporate governance mechanisms (e.g., CEO compensation), and extend the analysis to firms in different countries.

The study's limitations include the use of patent applications as the sole measure of radical innovation, which may not fully capture all forms of radical innovation. The study also does not investigate the mediating mechanisms through which entrepreneurial orientation impacts radical innovation, and focuses only on board characteristics within the corporate governance framework. The sample is limited to listed Chinese manufacturing firms, limiting the generalizability of the findings to other contexts.