Abstract
Previous research has explored the impact of political ties on corporate innovation performance, yet with controversial results. This study proposes that political ties has a curvilinear impact on innovation performance, and the resulting curvilinear relationship is moderated by absorptive capacity and external environment. We conduct examination based on a survey among Chinese manufacturing firms, which demonstrates an inverted U-shape relationship between political ties and corporate innovation performance. This inverted U-shape relationship is moderated by the absorptive capacity, which means the positive effect of political ties on corporate innovation performance is strong when the absorptive capacity of a firm is high. Furthermore, political ties, absorptive capacity and external environment (i.e. dynamism, munificence, and complexity) have a three-way interactive effect on corporate innovation, which means firms with strong political ties exhibit the highest innovation performance when their absorptive capacity and external environmental condition (dynamism or munificence or complexity) stand at high level simultaneously. The research findings provide a comprehensive understanding for firms, especially for those with different characteristics and under different external environments, to exploit political ties to facilitate corporate innovation performance.
Highlights
Innovation has been identified as a significant strategy and practice contributing to corporate competitiveness and survival (Amabile, Conti, Coon, Lazenby, & Herron, 1996; Kehoe & Tzabbar, 2015; Lin, Zeng, Liu, & Li, 2018; Lungeanu, Stern, & Zajac, 2016; Zhao, Cacciolatti, Lee, & Song, 2015; Yu, Zheng, Wang, Dai, & Yan, 2018; Zhou & Hoever, 2014)
Absorptive capacity positively correlates with innovation performance (r = .41, p < 0.001), and both environmental munificence and dynamism were positively related to innovation performance (r = 0.47, p < 0.001; r = 0.31, p < 0.001)
This study reconciles the existing mixed results by identifying the inverted U-shape relationship between political ties and innovation performance and its boundary conditions which enriches the current literature on political ties by providing an in-depth understanding on the complicated role of political ties on firm innovation under various conditions
Summary
Innovation has been identified as a significant strategy and practice contributing to corporate competitiveness and survival (Amabile, Conti, Coon, Lazenby, & Herron, 1996; Kehoe & Tzabbar, 2015; Lin, Zeng, Liu, & Li, 2018; Lungeanu, Stern, & Zajac, 2016; Zhao, Cacciolatti, Lee, & Song, 2015; Yu, Zheng, Wang, Dai, & Yan, 2018; Zhou & Hoever, 2014). Using the social network theory, many researchers argued that strong ties with government officials could enhance innovation performance, since close relationships between top managers and government officials could increase the opportunity for firms to access valuable government and public resources and information that were beneficial for corporate innovation (Acquaah, 2007). These previous research has not obtained consistent results on the relationship between political ties and innovation performance (Lin, Zeng, Ma, Qi, & Tam, 2014; Sheng et al, 2011). Based on a thorough analysis of existing literature on political ties (e.g., Peng, 2003; Peng & Luo, 2000; Wu, 2011), it demonstrates that there is an inverted U-shaped relationship, between political ties and corporate innovation performance
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