Share:


More is less? The curvilinear effects of political ties on corporate innovation performance

    Mingchuan Yu Affiliation
    ; Yujie Lu Affiliation
    ; Chao Li Affiliation
    ; Han Lin Affiliation
    ; Philip Shapira Affiliation

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.

Keyword : absorptive capacity, external environment, innovation performance, political ties

How to Cite
Yu, M., Lu, Y., Li, C., Lin, H., & Shapira, P. (2019). More is less? The curvilinear effects of political ties on corporate innovation performance. Technological and Economic Development of Economy, 25(6), 1309-1335. https://doi.org/10.3846/tede.2019.10718
Published in Issue
Nov 15, 2019
Abstract Views
127
PDF Downloads
65
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Acquaah, M. (2007). Managerial social capital, strategic orientation, and organizational performance in an emerging economy. Strategic Management Journal, 28(12), 1235-1255. https://doi.org/10.1002/smj.632

Aldrich, H. (2008). Organizations and environments. California: Stanford University Press.

Agrawal, A., & Knoeber, C. R. (2001). Do some outside directors play a political role? The Journal of Law and Economics, 44(1), 179-198. https://doi.org/10.1086/320271

Ahuja, G., & Lampert, C. M. (2001). Entrepreneurship in the large corporation: A longitudinal study of how established firms create breakthrough inventions. Strategic Management Journal, 22(6-7), 521-543. https://doi.org/10.1002/smj.176

Aiken, L. S., West, S. G., & Reno, R. R. (1991). Multiple regression: Testing and interpreting interactions. Sage.

Amabile, T. M., Conti, R., Coon, H., Lazenby, J., & Herron, M. (1996). Assessing the work environment for creativity. Academy of Management Journal, 39(5), 1154-1184. https://doi.org/10.2307/256995

Ang, S. H. (2008). Competitive intensity and collaboration: impact on firm growth across technological environments. Strategic Management Journal, 29(10), 1057-1075. https://doi.org/10.1002/smj.695

Avolio, B. J., Yammarino, F. J., & Bass, B. M. (1991). Identifying common methods variance with data collected from a single source: An unresolved sticky issue. Journal of Management, 17(3), 571-587. https://doi.org/10.1177/014920639101700303

Baron, R. A., & Tang, J. (2011). The role of entrepreneurs in firm-level innovation: Joint effects of positive affect, creativity, and environmental dynamism. Journal of Business Venturing, 26(1), 49-60. https://doi.org/10.1016/j.jbusvent.2009.06.002

Bentler, P. M., & Chou, C.-P. (1987). Practical issues in structural modeling. Sociological Methods & Research, 16(1), 78-117. https://doi.org/10.1177/0049124187016001004

Boubakri, N., Cosset, J.-C., & Saffar, W. (2008). Political connections of newly privatized firms. Journal of Corporate Finance, 14(5), 654-673. https://doi.org/10.1016/j.jcorpfin.2008.08.003

Brislin, R. W. (1970). Back-translation for cross-cultural research. Journal of Cross-cultural Psychology, 1(3), 185-216. https://doi.org/10.1177/135910457000100301

Cao, C., Fred Simon, D., & Suttmeier, R. P. (2009). China’s innovation challenge. Innovation, 11(2), 253-259. https://doi.org/10.5172/impp.11.2.253

Chen, X., & Wu, J. (2011). Do different guanxi types affect capability building differently? A contingency view. Industrial Marketing Management, 40(4), 581-592. https://doi.org/10.1016/j.indmarman.2010.12.014

Cheung, M. S., Myers, M. B., & Mentzer, J. T. (2010). Does relationship learning lead to relationship value? A cross-national supply chain Investigation. Journal of Operations Management, 28(6), 472487. https://doi.org/10.1016/j.jom.2010.01.003

Cloodt, M., Hagedoorn, J., & Van Kranenburg, H. (2006). Mergers and acquisitions: Their effect on the innovative performance of companies in high-tech industries. Research Policy, 35(5), 642-654. https://doi.org/10.1016/j.respol.2006.02.007

Cohen, W. M., & Levin, R. C. (1989). Empirical Studies of Innovation and Market Structure. Handbook of Industrial Organization, 2, 1059-1107. https://doi.org/10.1016/S1573-448X(89)02006-6

Cohen, W. M., & Levinthal, D. A. (1990). Absorptive capacity: a new perspective on learning and innovation. Administrative Science Quarterly, 128-152. https://doi.org/10.2307/2393553

De Noni, I., Ganzaroli, A., Orsi, L., & Roberta, A. (2013). Innovation, absorptive capacity, environmental complexity, trust and cooperation within clusters. Review of Integrative Business and Economics Research, 2(1), 276.

Dervitsiotis, K. N. (2012). An innovation-based approach for coping with increasing complexity in the global economy. Total Quality Management & Business Excellence, 23(9-10), 997-1011. https://doi.org/10.1080/14783363.2012.728849

Desender, K. A., Aguilera, R. V., Crespi, R., & García-cestona, M. (2013). When does ownership matter? Board characteristics and behavior. Strategic Management Journal, 34(7), 823-842. https://doi.org/10.1002/smj.2046

Dess, G. G., & Beard, D. W. (1984). Dimensions of organizational task environments. Administrative Science Quarterly, 29(1), 52-73. https://doi.org/10.2307/2393080

Dinç, I. S. (2005). Politicians and banks: Political influences on government-owned banks in emerging markets. Journal of Financial Economics, 77(2), 453-479. https://doi.org/10.1016/j.jfineco.2004.06.011

Fagerberg, J., & Verspagen, B. (2002). Technology-gaps, innovation-diffusion and transformation: an evolutionary interpretation. Research Policy, 31(8), 1291-1304. https://doi.org/10.1016/S0048-7333(02)00064-1

Finkelstein, S., & Boyd, B. K. (1998). How much does the CEO matter? The role of managerial discretion in the setting of CEO compensation. Academy of Management Journal, 41(2), 179-199. https://doi.org/10.2307/257101

Goll, I., & Rasheed, A. A. (2004). The moderating effect of environmental munificence and dynamism on the relationship between discretionary social responsibility and firm performance. Journal of Business Ethics, 49(1), 41-54. https://doi.org/10.1023/B:BUSI.0000013862.14941.4e

Grimm, C. M., Lee, H., & Smith, K. G. (2005). Strategy as action: Competitive Dynamics and competitive advantage. Oxford University Press.

Guo, H., Xu, E., & Jacobs, M. (2014). Managerial political ties and firm performance during institutional transitions: An analysis of mediating mechanisms. Journal of Business Research, 67(2), 116127. https://doi.org/10.1016/j.jbusres.2012.11.009

Han, M. N., Lin, H., Wang, J. Y., Wang, Y. Z., & Jiang, W. (2019). Turning corporate environmental ethics into firm performance: The role of green marketing programs. Business Strategy and the Environment, 28(6), 929-938. https://doi.org/10.1002/bse.2290

Hendriks, P. (1999). Why share knowledge? The influence of ICT on the motivation for knowledge sharing. Knowledge and Process Management, 6(2), 91. https://doi.org/10.1002/(SICI)1099-1441(199906)6:2<91::AID-KPM54>3.0.CO;2-M

Hillman, A. J., & Hitt, M. A. (1999). Corporate political strategy formulation: A model of approach, participation, and strategy decisions. Academy of Management Review, 24(4), 825-842. https://doi.org/10.5465/amr.1999.2553256

Hitt, M. A., Keats, B. W., & DeMarie, S. M. (1998). Navigating in the new competitive landscape: Building strategic flexibility and competitive advantage in the 21st century. The Academy of Management Executive, 12(4), 22-42. https://doi.org/10.5465/ame.1998.1333922

Huergo, E., & Jaumandreu, J. (2004). How does probability of innovation change with firm age? Small Business Economics, 22(3-4), 193-207. https://doi.org/10.1023/B:SBEJ.0000022220.07366.b5

Jansen, J. J., Van Den Bosch, F. A., & Volberda, H. W. (2005). Managing potential and realized absorptive capacity: how do organizational antecedents matter? Academy of Management Journal, 48(6), 999-1015. https://doi.org/10.5465/amj.2005.19573106

Jansen, J. J., Vera, D., & Crossan, M. (2009). Strategic leadership for exploration and exploitation: The moderating role of environmental dynamism. Leadership Quarterly, 20(1), 5-18. https://doi.org/10.1016/j.leaqua.2008.11.008

Jansen, J. J. P., Den Bosch, F. V., & Volberda, H. W. (2006). Exploratory innovation, exploitative innovation, and performance: Effects of organizational antecedents and environmental moderators. Management Science, 52(11), 1661-1674. https://doi.org/10.1287/mnsc.1060.0576

Jiao, H., Koo, C. K., & Cui, Y. (2015). Legal environment, government effectiveness and firms’ innovation in China: Examining the moderating influence of government ownership. Technological Forecasting and Social Change, 96, 15-24. https://doi.org/10.1016/j.techfore.2015.01.008

Kehoe, R. R., & Tzabbar, D. (2015). Lighting the way or stealing the shine? An examination of the duality in star scientists’ effects on firm innovative performance. Strategic Management Journal, 36(5), 709-727. https://doi.org/10.1002/smj.2240

Kotabe, M., Jiang, C. X., & Murray, J. Y. (2017). Examining the complementary effect of political networking capability with absorptive capacity on the innovative performance of emerging-market firms. Journal of Management, 43(4), 1131-1156. https://doi.org/10.1177/0149206314548226

Kotabe, M., Jiang, C. X., & Murray, J. Y. (2011). Managerial ties, knowledge acquisition, realized absorptive capacity and new product market performance of emerging multinational companies: A case of China. Journal of World Business, 46(2), 166-176. https://doi.org/10.1016/j.jwb.2010.05.005

Landis, R. S., Beal, D. J., & Tesluk, P. E. (2000). A comparison of approaches to forming composite measures in structural equation models. Organizational Research Methods, 3(2), 186-207. https://doi.org/10.1177/109442810032003

Lechner, C., Frankenberger, K., & Floyd, S. W. (2010). Task contingencies in the curvilinear relationships between intergroup networks and initiative performance. Academy of Management Journal, 53(4), 865-889. https://doi.org/10.5465/amj.2010.52814620

Lester, D. L., & Parnell, J. A. (2008). Firm size and environmental scanning pursuits across organizational life cycle stages. Journal of Small Business and Enterprise Development, 15(3), 540-554. https://doi.org/10.1108/14626000810892337

Li, H., & Atuahene-Gima, K. (2001). Product innovation strategy and the performance of new technology ventures in China. Academy of Management Journal, 44(6), 1123-1134. https://doi.org/10.2307/3069392

Li, H., Meng, L., Wang, Q., & Zhou, L.-A. (2008a). Political connections, financing and firm performance: Evidence from Chinese private firms. Journal of Development Economics, 87(2), 283-299. https://doi.org/10.1016/j.jdeveco.2007.03.001

Li, H., & Zhang, Y. (2007). The role of managers’ political networking and functional experience in new venture performance: Evidence from China’s transition economy. Strategic Management Journal, 28(8), 791-804. https://doi.org/10.1002/smj.605

Li, J. J., Poppo, L., & Zhou, K. Z. (2008b). Do managerial ties in China always produce value? Competition, uncertainty, and domestic vs. foreign firms. Strategic Management Journal, 29(4), 383-400. https://doi.org/10.1002/smj.665

Li, J. J., Poppo, L., Zhou, K. Z. (2010). Relational mechanisms, formal contracts, and local knowledge acquisition by international subsidiaries. Strategic Management Journal, 31(4), 349-370. https://doi.org/10.1002/smj.813

Li, J. J., Zhou, K. Z., & Shao, A. T. (2009). Competitive position, managerial ties, and profitability of foreign firms in China: An interactive perspective. Journal of International Business Studies, 40(2), 339-352. https://doi.org/10.1057/jibs.2008.76

Lichtenthaler, U. (2009). Absorptive capacity, environmental turbulence, and the complementarity of organizational learning processes. Academy of Management Journal, 52(4), 822-846. https://doi.org/10.5465/amj.2009.43670902

Lin, H., Zeng, S. X., Ma, H. Y., Qi, G. Y., & Tam, V. W. Y. (2014). Can political capital drive corporate green innovation? Lessons from China. Journal of Cleaner Production, 64, 63-72. https://doi.org/10.1016/j.jclepro.2013.07.046

Lin, H., Zeng, S. X., Ma, H. Y., & Chen, H. Q. (2015). How political connection affects corporate environmental performance: The mediating role of green subsidies. Human and Ecological Risk Assessment: An International Journal, 21(8), 2192-2212. https://doi.org/10.1080/10807039.2015.1044937

Lin, H., Zeng, S. X., Liu, H. J., & Li, C. (2016). How do intermediaries drive corporate innovation? A moderated mediating examination. Journal of Business Research, 69(11), 4831-4836. https://doi.org/10.1016/j.jbusres.2016.04.039

Lin, H., Zeng, S. X., Liu, H. J. & Li, C. (2018). Bridging the gaps or fecklessness? A moderated mediating examination of intermediaries’ effects on corporate innovation. Technovation, (in press). https://doi.org/10.1016/j.technovation.2018.02.006

Liu, F. C., Simon, D. F., Sun, Y. T., & Cao, C. (2011). China’s innovation policies: Evolution, institutional structure, and trajectory. Research Policy, 40(7), 917-931. https://doi.org/10.1016/j.respol.2011.05.005

Liu, M., & Yu, J. (2008). Financial structure, development of small and medium enterprises, and income distribution in the People’s Republic of China. Asian Development Review, 25(1/2), 137.

Lungeanu, R., Stern, I., & Zajac, E. J. (2016). When do firms change technology–sourcing vehicles? The role of poor innovative performance and financial slack. Strategic Management Journal, 37(5), 855-869. https://doi.org/10.1002/smj.2371

Luo, Y. (2003). Industrial dynamics and managerial networking in an emerging market: The case of China. Strategic Management Journal, 24(13), 1315-1327. https://doi.org/10.1002/smj.363

McArthur, A. W., & Nystrom, P. C. (1991). Environmental dynamism, complexity, and munificence as moderators of strategy-performance relationships. Journal of Business Research, 23(4), 349-361. https://doi.org/10.1016/0148-2963(91)90020-X

Miles, M. P., Covin, J. G., & Heeley, M. B. (2000). The relationship between environmental dynamism and small firm structure, strategy, and performance. Journal of Marketing Theory and Practice, 8(2), 63-78. https://doi.org/10.1080/10696679.2000.11501869

Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organiza-tional advantage. Academy of Management Review, 23(2), 242-266. https://doi.org/10.5465/amr.1998.533225

Okhmatovskiy, I. (2010). Performance implications of ties to the government and SOEs: A political embeddedness perspective. Journal of Management Studies, 47(6), 1020-1047. https://doi.org/10.1111/j.1467-6486.2009.00881.x

Peng, M. W. (2003). Institutional transitions and strategic choices. Academy of Management Review, 28(2), 275-296. https://doi.org/10.5465/amr.2003.9416341

Peng, M. W., & Luo, Y. (2000). Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43(3), 486-501. https://doi.org/10.2307/1556406

Perry-Smith, J. E., & Shalley, C. E. (2003). The social side of creativity: a static and dynamic social network perspective. Academy of Management Review, 28(1), 89-106. https://doi.org/10.5465/amr.2003.8925236

Pfeffer, J., & Salancik, G. R. (2003). The external control of organizations: A resource dependence perspective. Stanford University Press.

Podsakoff, P. M., Mackenzie, S. B., Lee, J., & Podsakoff, N. P. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879-903. https://doi.org/10.1037/0021-9010.88.5.879

Podsakoff, P. M., & Organ, D. W. (1986). Self-reports in organizational research: Problems and prospects. Journal of Management, 12(4), 531-544. https://doi.org/10.1177/014920638601200408

Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: The Free Press.

Sheng, S., Zhou, K. Z., & Li, J. J. (2011). The effects of business and political ties on firm performance: Evidence from China. Journal of Marketing, 75(1), 1-15. https://doi.org/10.1509/jmkg.75.1.1

Shi, W. S., Markóczy, L., & Stan, C. V. (2014). The continuing importance of political ties in China. The Academy of Management Perspectives, 28(1), 57-75. https://doi.org/10.5465/amp.2011.0153

Shu, C., Page, A. L., Gao, S., & Jiang, X. (2012). Managerial ties and firm innovation: is knowledge creation a missing link? Journal of Product Innovation Management, 29(1), 125-143. https://doi.org/10.1111/j.1540-5885.2011.00883.x

Song, H., & Eveland Jr, W. P. (2015). The structure of communication networks matters: how network diversity, centrality, and context influence political ambivalence, participation, and knowledge. Political Communication, 32(1), 83-108. https://doi.org/10.1080/10584609.2014.882462

Sun, P., Mellahi, K., & Wright, M. (2012). The contingent value of corporate political ties. The Academy of Management Perspectives, 26(3), 68-82. https://doi.org/10.5465/amp.2011.0164

Tan, J. J., & Litsschert, R. J. (1994). Environment-strategy relationship and its performance implications: an empirical study of the chinese electronics industry. Strategic Management Journal, 15(1), 1-20. https://doi.org/10.1002/smj.4250150102

Uzzi, B. (1997). Social structure and competition in interfirm networks: The paradox of embeddedness. Administrative Science Quarterly, 42(5), 35-67. https://doi.org/10.2307/2393808

Uzzi, B. (1999). Embeddedness in the making of financial capital: How social relationsand networks benefit firms seeking financing. American Sociological Review, 64(4), 481-505. https://doi.org/10.2307/2657252

Villena, V. H., Revilla, E., & Choi, T. Y. (2011). The dark side of buyer–supplier relation-ships: a social capital perspective. Journal of Operations Management, 29(6), 561-576. https://doi.org/10.1016/j.jom.2010.09.001

Wang, H., & Chen, W. R. (2010). Is firm-specific innovation associated with greater value appropriation? The roles of environmental dynamism and technological diversity. Research Policy, 39(1), 141-154. https://doi.org/10.1016/j.respol.2009.09.015

Wang, H., & Li, J. (2008). Untangling the effects of overexploration and overexploitation on organizational performance: The moderating role of environmental dynamism. Journal of Management, 34(5), 925-951. https://doi.org/10.1177/0149206308321547

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171-180. https://doi.org/10.1002/smj.4250050207

Wu, J. (2011). Asymmetric roles of business ties and political ties in product innovation. Journal of Business Research, 64(11), 1151-1156. https://doi.org/10.1016/j.jbusres.2011.06.014

Wu, J., & Pangarkar, N. (2010). The bidirectional relationship between competitive intensity and collaboration: Evidence from China. Asia Pacific Journal of Management, 27(3), 503-522. https://doi.org/10.1007/s10490-009-9156-1

Xin, K. K., & Pearce, J. L. (1996). Guanxi: Connections as substitutes for formal institutional support. Academy of Management Journal, 39(6), 1641-1658. https://doi.org/10.2307/257072

Yu, M. C., Zheng, X. T., Wang, G. G., Dai, Y., & Yan, B. (2018). When does motivation to learn reduce innovative behavior? An examination of mediated-moderation model. Baltic Journal of Management, 13(4), 564-581. https://doi.org/10.1108/BJM-09-2017-0279

Zahra, S. A., Filatotchev, I., & Wright, M. (2009). How do threshold firms sustain corporate entrepreneurship? The role of boards and absorptive capacity. Journal of Business Venturing, 24(3), 248-260. https://doi.org/10.1016/j.jbusvent.2008.09.001

Zhang, Y., & Li, H. (2009). Ties with service intermediaries and product innovation of new ventures in technology cluster: evidence from China. Strategic Management Journal, 31(1), 88-109. https://doi.org/10.1002/smj.806

Zhang, Y., & Li, H. (2010). Innovation search of new ventures in a technology cluster: the role of ties with service intermediaries. Strategic Management Journal, 31(1), 88-109. https://doi.org/10.1002/smj.806

Zhao, S., Cacciolatti, L., Lee, S. H., & Song, W. (2015). Regional collaborations and indigenous innovation capabilities in China: A multivariate method for the analysis of regional innovation systems. Technological Forecasting and Social Change, 94, 202-220. https://doi.org/10.1016/j.techfore.2014.09.014

Zheng, W., Singh, K., & Mitchell, W. (2015). Buffering and enabling: The impact of interlocking political ties on firm survival and sales growth. Strategic Management Journal, 36(11), 1615-1636. . https://doi.org/10.1002/smj.2301

Zhou, J., & Hoever, I. J. (2014). Research on workplace creativity: A review and redirection. Annual Review Organizational Psychology Organization Behavior, 1(1), 333-359. https://doi.org/10.1146/annurev-orgpsych-031413-091226

Zhou, K. Z., Zhang, Q., Sheng, S., Xie, E., & Bao, Y. (2014). Are relational ties always good for knowledge acquisition? Buyer–supplier exchanges in China. Journal of Operations Management, 32(3), 88-98. https://doi.org/10.1016/j.jom.2014.01.001