Political Connection, Technological Innovation Capability and Business Performance of Latecomer Firms in Emerging Economy

Abstract

The emerging economy has the characteristics of formal system defects, technology shortage and market instability. The political connection of enterprises in the emerging economy can make up for these defects to a certain extent. Based on the situation that latecomers in emerging economy beyond catching-up, this paper selects 490 Chinese listed companies to explore the relationship among political connection, technological innovation capability and business performance. It is found that political connection has a positive impact on business performance on the basis of improving the technological innovation capability of firms, and technological innovation capability is the intermediary variable between political connection and business performance. It is basically consistent with the innovation practice of latecomer firms in emerging economy. Combined with the international background of unilateralism and protectionism rising, this paper proposes strategies for how latecomer firms in emerging economy can skillfully use political connection to improve their technological innovation capabilities, including: using political connections to arouse entrepreneurship and stimulate leading innovation; using political connections to promote the new development pattern of "double cycle"; strengthening political connection audit.