Abstract:     The recovery of poor-performing firms is an important strategic issue. Based on the dynamic capability theory, this paper constructed a recovery model of poor-performing firms based on persistent innovation. It focused on the relationship between the cultivation of persistent innovation capability and the recovery of such firms, and it also discussed the moderating effects of the degree of marketization level and regional trust level. Based on the data of 455 Chinese listed companies under poor performance from 2007 to 2018, this paper made a study and the results showed that: (1) the cultivation of persistent innovation capability of poor-performing firms has a significantly positive effect on value recreation, that is, both of the immediate response strategy which aims at strengthening current innovation input and the precautionary strategy which aims at exploiting previous innovation accumulation are conducive to the firms′ recovery. (2) The effect of the poor-performing firms′ persistent innovation capability on its recovery will be restricted by institutional environment, and the marketization level strengthens the positive relationship between the precautionary strategy and the firms′ recovery; and the regional trust level strengthens both the positive effect of immediate response strategy and precautionary strategy on the firms′ recovery. (3) Compared with state-owned enterprises, precautionary strategy exerts greater value in the poor-performing private enterprises. And the moderating effects of regional trust level also exhibits greater effect on such poor-performing private enterprises. This paper revealed the impact mechanism of persistent innovation on the recovery of poor-performing firms, which makes great theoretical and practical contributions to how to enable the poor-performing firms to achieve recovery.

Key words: poor performance, recovery strategy, value recreation, persistent innovation