The impact of political ties on firm innovativeness: Testing a mediation and moderation model

Abstract

This study utilizes network exploitation and exploration theory to distinguish the exploitative and exploratory mechanisms (government support and boundary-spanning learning, respectively) that convert political ties into firm innovativeness. It also examines the moderating roles market uncertainty plays in how political ties influence firm innovativeness. An empirical analysis of 262 manufacturers in China indicates that both government support and boundary-spanning learning mediate the link between political ties and firm innovativeness. Market uncertainty negatively moderates the impact of political ties on boundary-spanning learning but does not significantly moderate their impact on government support. Moreover, market uncertainty moderates the impact of government support on firm innovativeness negatively but moderates the impacts of boundary-spanning learning on firm innovativeness positively. This study theorizes two mediating factors for how firms exploit and explore their political ties to increase their innovativeness and enriches the knowledge of how market uncertainty affects the relationship between political ties and innovation.