What the study found
The study found that firms with political connections tend to show lower innovation performance. It also found that research and development (R&D) investment intensity is one way this relationship operates, while dynamic capabilities and board independence can reduce the negative effect.
Why the authors say this matters
The authors conclude that the study clarifies the "innovation paradox" of political ties, meaning the tension between political connections and innovation outcomes. They say the findings provide micro-level governance evidence and suggest ways for regulators and firm managers to reduce the innovation costs associated with political connections.
What the researchers tested
The researchers used regression analysis with panel data from 5,549 Chinese listed companies between 2008 and 2021. They drew on dynamic capability theory and a non-market perspective to test how political connections relate to corporate innovation performance and what factors moderate that relationship.
What worked and what didn't
Political connections were found to have a negative influence on innovation. R&D investment intensity was identified as the channel through which political connections affect innovation, while dynamic capabilities and board independence mitigated the negative effect. The negative impact was especially prominent in state-owned and technology-intensive enterprises compared with non-state-owned and non-technology-intensive enterprises.
What to keep in mind
The abstract does not describe specific study limitations. The findings are based on Chinese listed companies, so the reported results are tied to that sample and context.
Key points
- Political connections were associated with lower innovation performance.
- R&D investment intensity was identified as the mechanism linking political connections to innovation.
- Dynamic capabilities and board independence reduced the negative effect.
- The negative association was stronger in state-owned and technology-intensive firms.
- The study used panel data from 5,549 Chinese listed companies from 2008 to 2021.
Disclosure
- Research title:
- Political connections are linked to lower corporate innovation
- Authors:
- Qianqian Chen, Baoying Zhu, Seong-Jin Choi
- Institutions:
- Hanyang University, Hanyang University, Shandong University of Finance and Economics, University of International Business and Economics
- Publication date:
- 2026-03-07
- OpenAlex record:
- View
- Image credit:
- Ministry of Finance of India, Wikimedia Commons, GODL-India
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