The Effects of Social Ties on Innovation Behavior and New Product Performance: The Moderating Role of Market and Institutional Environments

Abstract

This paper offers a theoretical and empirical understanding of how social ties affect innovation behaviour and new product performance in emerging economies. We examine whether innovation behavior binds the political and business ties of the firm to new product performance. We also examine if these effects are contingent on variations in the institutional environment and market environment. Structural equation modeling and mediation analyses were used on a sample of 344 small and medium size enterprises in Istanbul. Business ties are positively related to exploratory innovation behavior and political ties hamper such behavior. We also show that government support hinders firms’ disruptive innovation while encouraging incremental innovation behavior. We further demonstrate that the positive and indirect relation of business ties to new product performance through exploratory and exploitative innovation is largely insensitive to changes in market and institutional environments. Political ties are negatively (positively) and indirectly related to new product performance through exploratory (exploitative) innovation.