Abstract
This paper examines the impacts of corporate social network on innovation activities (both R&D inputs and patent outputs) and explores the potential influence path of social networks driving corporate innovation. Using Chinese share markets’ listed companies in the period from 2009 to 2016 as the sample, we establish a new type of social network based on the connections of the core management team (including directors, supervisors and executives) and find that a corporate social network based on the core management team has a positive causal effect on enhancing R&D investments and patent performance. Empirical results are robust after controlling for endogeneity and the causal relationship between social networks and corporate innovation is robustly monotonic. We perform a mediation analysis following the bootstrapping procedures, and find that alleviating financial constraints plays a mediating role in the process of a social network of this new type improving corporate innovation, while mitigating agency conflicts does not. Our conclusions demonstrate that, in the promotion of corporate innovation by the corporate social network, financial constraints have a more profound impact than agency costs.
Highlights
Corporate innovation ability is an important factor affecting a firm’s value and economic performance
Using Chinese share markets’ listed companies in the period from 2009 to 2016 as the sample, we establish a new type of social network based on the connections of the core management team and find that a corporate social network based on the core management team has a positive causal effect on enhancing research and development (R&D) investments and patent performance
Patent outputs are the direct results of R&D investment, so we further study the effects of social networks on patent performance
Summary
Corporate innovation ability is an important factor affecting a firm’s value and economic performance. Few studies have examined the impact of decision makers’ social networks on corporate performance from the perspective of the corporate core management team (including directors, supervisors and executives). This paper includes all the social connections between directors, supervisors and executives among different companies in the construction of the social network and extends the “director/CEO network” commonly analyzed in the existing studies to the “core management team network”, builds a denser social network with companies as nodes, and performs a deeper network structure analysis for Chinese listed companies’ activities. In the promotion of corporate innovation by a social network of this new type, financial constraints have a stronger and more profound impact than do agency costs, and the external financing environment, financing convenience and financial support are more important than the internal principal-agent efficiency.
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