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To improve our understanding of the bright side and the dark side of political ties and determine the processes linking political ties to firm performance in emerging markets, we investigate the underlying mechanism of political ties’ effects from the perspective of dynamic capability theory and institutional theory. We posit that reduced market-fo...
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... that factor analysis was appropriate. In the third step, an EFA was undertaken, and the analysis generated five factors with eigenvalues greater than one (together explaining 73.306% of the total variance; see Table 3). The items in the first four factors had a clear meaning, so according to the legitimacy definition of Dacin, Oliver, and Roy (2007), we could easily categorize them as relational legitimacy, social legitimacy, market legitimacy, and investment legitimacy. ...Context 2
... addition, we removed six items from the measurement model due to weak loading or cross loading (Hogan et al., 2011). Table 3 shows the formal scale including the 13 items. ...Citations
... Innovation and operational capabilities have been recognized as two crucial capabilities that are fundamental for boosting a firm's competitiveness and adaptability in dynamic business environments (Gu et al., 2018;Saboo et al., 2017;Zhou et al., 2017). Innovation capability help firms gain insights and solutions to efficiently address stakeholders' demands (Ju et al., 2013;Wang et al., 2021), which complement firms' information processing capability in addressing uncertainty in TPA projects. Operational flexibility stands out as the key component of a firm's operational capabilities (Gerwin, 1993;Gu et al., 2018;Upton, 1994). ...
While firm digitalization has significantly shaped business conduct and performance, our understanding of how it affects firms’ engagement with social issues such as poverty alleviation remains underdeveloped. Drawing on information processing theory, we propose that digitalization empowers firms to undertake poverty alleviation responsibilities by enhancing their information processing capabilities. We further develop an integrative framework that highlights the synergetic effects between institutional pressures and firm capability portfolios. We argue that the positive impact of firm digitalization is stronger when institutional pressures are presented (i.e., government intervention and state ownership) and when firms possess complementary capabilities (i.e., innovation capability and operational flexibility). The results of our analysis of 2015–2020 panel data on Chinese listed firms provide strong support for our hypotheses. Overall, this study provides a capability-based view for the poverty alleviation research and informs policymakers a fresh new way to foster firms’ engagement in poverty alleviation.
... In emerging markets, including China, the growing influence of political connections on corporate economy and behavior has been gaining increasing attention [81]. The existing literature shows that scholars have extensively studied the financial impacts of corporate political connections, generally divided into positive and negative views [82,83]. Research on non-financial impacts of political connections primarily focuses on innovation performance, including patent applications and R&D expenditures [84,85]. ...
Accurate disclosure and proactive engagement in ESG practices are essential for achieving high-quality economic development, particularly as China addresses significant challenges during its reform journey. The Classified Reform of State-Owned Enterprises (CRSOE) is a strategic initiative by the Chinese government aimed at fostering this development. Our study leverages the implementation of the CRSOE as an exogenous shock, employing the difference-in-differences approach to assess the policy’s governance impact on ESG decoupling from the perspective of ownership heterogeneity. The policy was found to alleviate ESG decoupling, particularly pronounced among SOEs with special functions. The governance effect is achieved by reducing the aspiration–performance gap. Specifically, the policy effectively narrows the disparity between a company’s actual performance and the expected performance based on the industry average, thereby mitigating ESG decoupling. However, the policy’s impact can be weakened by factors such as political connections among executives and media attention. Furthermore, the CRSOE effectively addresses greenwashing practices within ESG decoupling, with a particularly strong effect on SOEs that fail to disclose ESG information in alignment with Global Reporting Initiative (GRI) standards. These findings highlight the importance of understanding the broader implications and underlying mechanisms of the policy. Therefore, building on the assessment of how the CRSOE policy impacts ESG decoupling, we also examine the mechanisms through which this policy operates and how its effectiveness varies under different conditions of heterogeneity. By extending the application of principal-agent theory and performance feedback theory, our research suggests that policymakers should prioritize market-driven reforms for fully competitive SOEs and promote a stronger emphasis on non-financial goals. Additionally, it is essential to mitigate the undue influence of political promotions on the management of all SOEs.
... Achieved political tie: This is measured by whether the firm's board chair or CEO was serving as a delegate to the People's Congress (PC) or Chinese People's Political Consultative Conference (CPPCC) . Achieved political connections confer elite status to Chinese entrepreneurs, which can prompt firms to actively respond to CSR and sustainability development initiatives (Wang et al., 2019). ...
Using data for manufacturing firms listed on China A‐share markets between 2003 and 2018, this research explores the impact of institutional investors on corporate green innovation. The study finds that pressure‐resistant institutional investors (PR investors) positively contribute to green innovation, whereas pressure‐sensitive institutional investors (PS investors) hinder it. In addition, this study examines the moderating effect of political ties, distinguishing between ascribed and achieved ties. Ascribed ties weaken the positive relationship between PR investors and green innovation, whereas achieved ties strengthen it and weaken the negative association between PS investors and green innovation. Moreover, the study investigates the influence of institutional development on the relationship between institutional investors and green innovation, and finds that managerial myopia is the mechanism through which institutional investors influence green innovation. Furthermore, this study reveals that there are heterogeneity effects among small and large firms, polluting and non‐polluting firms, and firms facing different levels of market competition. Overall, the study sheds new light on how institutional investors, acting as ‘invisible hands’, interact with political ties, acting as ‘visible hands’, to impact green innovation in transition economies.
... We reveal that political ties of founders weaken the relationship between slack resources and R&D investment whereas their managerial ties strengthen the slack and R&D linkages. In this sense, the paper demonstrates the distinctive roles of social ties by investigating the micro-level within an organisation in terms of how these key elements of founder characteristics (including human capital) are leveraged in newly listed firms (Wang, Zhang, & Shou, 2021). ...
This paper studies the relationship between slack and research and development (R&D) investment by addressing the role of the founder as the ‘microfoundation’ among Chinese newly listed firms. We propose a contingent approach to understanding the slack-R&D investment relationship by examining the influence of the founder’s human capital and social ties, which is distinguished into political and managerial ties. Our results show that the founder’s human capital, measured by its educational level, strengthens the relationship between absorbed and unabsorbed slack resources and R&D investment. We also find that the founder’s managerial ties strengthen the relationship between resource slack and R&D intensity, whereas political ties weaken that link. Our results demonstrate the founder’s crucial role in underpinning resource utilization in newly listed firms and emphasise the importance of social ties in driving firms’ R&D activities in emerging economies.
... In contrast, central political affiliations can serve as a beacon of stability, often translating to economic rewards and a competitive edge [40,41]. Drawing from the irreplaceability principle of Shogren et al. (1994) and the recent findings of Wang et al. (2021), which indicate that investors often prefer known certainties over unknown risks [10,42], it can be posited that robust central affiliations might eclipse the perceived benefits of innovation. ...
... In contrast, central political affiliations can serve as a beacon of stability, often translating to economic rewards and a competitive edge [40,41]. Drawing from the irreplaceability principle of Shogren et al. (1994) and the recent findings of Wang et al. (2021), which indicate that investors often prefer known certainties over unknown risks [10,42], it can be posited that robust central affiliations might eclipse the perceived benefits of innovation. ...
This study delves into investors’ perceptions of the polluting label attached to listed manufacturing firms, emphasizing the interplay between external political ties and internal green innovative capability in influencing these perceptions. Drawing on a longitudinal analysis of listed manufacturing firms in China from 2010 to 2020 and employing a difference-in-differences (DID) approach, we treat firms identified under the National Specially Monitored (NSM) program as the treated group, while non-NSM firms form the control group. The time variable captures the period post the introduction of the NSM program. Our findings highlight that the polluting label created a loss prospect for investors, signifying diminishing returns over time. Interestingly, firms with closer connections to local governments experienced amplified negative investor perceptions. In contrast, strong affiliations with the central government and robust green innovative capabilities cushioned these adverse reactions. Notably, central ties proved even more beneficial when complemented by green innovative capability. By melding signal theory with the literature on sense-making, this research adds nuance to the discourse on the role of resources in determining firm success amidst environmental controversies.
... As Ahuja and Yayavaram (2011) suggested, reliance on political ties to obtain nonmarket rents "may well imply a weakening in the development of some other productive capabilities and thus weaken firms' ability to earn other forms of rents such as efficiency and innovation rents." Wang et al. (2021) argued that political ties may make firms accustomed to operating within a "protected" industry and discourage them from developing firm capability, making them less adaptive to market changes. Based on a longitudinal case analysis of multinational enterprises' political networks in China, Sun et al. (2016) also found that in a dynamic business environment, these firms' block ties with local governments, which initially helped them to expand rapidly across the nation, eventually became a liability because they resulted in the underdevelopment of market-based skills and localized products. ...
Drawing on political connection literature, we distinguish two types of political ties, horizontal (i.e., block ties with regions) and vertical (i.e., line ties with departments), and examine their effects on firm innovation. Based on a panel of Chinese public-listed private firms, we find that firms whose executives have block ties innovate much less than those without such ties, particularly when they are located in regions with less developed markets. In contrast, line ties increase firm innovation, particularly when the firms are located in regions with more developed markets. However, it also shows that the effect of line ties is attenuated when regional governments place a greater emphasis on innovation. Our research contributes to the literature on the relationship between political ties and firm innovation, the heterogeneity of political ties, and the interplay between political ties and the institutional environment.
... According to the innovation performance under the government subsidies, the efect of subsidies is controversial in existing literature, including three types of conclusions: the incentive performance of promoting innovation, the negative performance of inhibiting innovation, and the mixed performance of "inverted U" [10,11] or "double-edged sword" [12]. In the negative efects, it is found that subsidies lead to mismatch in the allocation of innovation resources. ...
Aiming at the improvement of innovation efficiency after enterprise obtaining subsidies, this paper constructs two-stage innovation benefit model about research and development (R&D) and transformation and achieves Nash equilibrium of innovative inputs to solve the objective discrepancy of innovation between government and enterprise. The main conclusions are as follows: there are three kinds of resource allocation structure in the way of achieving Nash equilibrium. The allocation structure is determined by the sensitivity of benefits (differentiated by social benefits and enterprise benefits) to R&D and transformation. After obtaining subsidies, enterprise optimizes resource allocation and results in crowding out effect, which is the inevitable choice for enterprise to seek benefits. Relative to the enterprise budget, when the proportion of government subsidies is few, the way of subsidies does not affect benefits. When the government invests more subsidies, which are designated for R&D, there is the possibility of dual losses of social benefits and enterprise benefits. The conclusion defines the proportion of subsidies to enterprise budgets so as to differentiate the allocation structure of innovative inputs. The practical significance is to provide a precise method of resource allocation from the microlevel of enterprise project, which alleviates the objective discrepancy between the government and enterprise.
... Third, prior studies are largely cross-sectional, limiting the exploration of the causal impact of political ties on innovation capability (e.g. Wang et al., 2021). As a result, we still lack a clear understanding of how political ties influence innovation capability in China. ...
Though the benefits of political ties in emerging markets are well-documented, their potential negative impact on firms' innovation capabilities (i.e., the efficiency of transforming resource inputs into innovative outputs) has not been thoroughly explored. Building on the upper echelons theory, we propose that political ties hinder innovation capabilities by diverting executives’ focus away from innovation transformation. We also suggest that the detrimental effect of political ties is weakened for firms with executives having R&D backgrounds or overseas experience. Our findings based on publicly listed private manufacturing firms in China from 2008 to 2017 confirm our predictions, after correcting for endogeneity. These findings offer a new theoretical lens to explain political ties’ dark side and a nuanced understanding on how to leverage political ties effectively in emerging markets.
... 1 3 in a transition economy, they remain useful for bolstering firm performance (Lim et al., 2018;Zhang et al., 2015). For example, building political ties is still a prevalent strategy among privately owned small and medium-sized enterprises (SMEs) (Wang et al., 2021;Zhou et al., 2014), and such informal institutional arrangements can help these firms cope with the uncertainties inherent in the transition process (Guo et al., 2014;Peng & Luo, 2000). ...
... As Luo (2003) suggested, firm executives facing institutional changes devote more effort to networking with government officials so as to alleviate pressure on their firms and seek new opportunities. However, research on the relationship between political ties and firm performance has yielded mixed findings, especially when considering moderating effects such as situated factors (Hadani & Schuler, 2013;Wang et al., 2021;Zhou et al., 2014). For example, Zhang et al., (2020) found that political ties enhanced firm performance under high levels of uncertainty due to the increased importance of the resources associated with political ties, which strengthened institutional support and increased firm legitimacy. ...
... We demonstrate that such a differentiation can enhance our understanding of the process that connects political ties to firm performance. In doing so, this study goes beyond the extant literature, which has focused on the resources and capabilities derived from political ties as mechanisms (e.g., Guo et al., 2014;Zhu et al., 2017) and responds to calls to evaluate the processes through which the advantages of political ties are leveraged (Wang et al., 2021). Second, much of the literature has focused on environmental factors (e.g., Tian et al., 2019;Zhang et al., 2020), rather than the agentic role of key individuals in leveraging political ties. ...
This study investigates how and under which conditions political ties affect firm performance in a transition economy. Using the network-based view of social capital, we first distinguish between the two stages of accessing and mobilizing social capital in political ties, and then focus on network exploitation of political ties, proposing that government support acts as a mechanism that converts political ties into firm performance. We further examine the role of two personal traits of CEOs—political utilization orientation and prosocial orientation—in moderating this relationship. Using multi-source data from 626 small and medium-sized enterprises in China’s transition economy, we find that the effect of political ties on firm performance largely depends on the extent to which political ties can be utilized, and that the CEO’s political utilization orientation and prosocial orientation positively moderate this relationship. The implications of our findings for theory and practice are discussed.
... The tremendous growth of innovative economies such as China, India, and Bangladesh inspires other regional economies to explore and exploit the phenomenon (Bruton et al., 2021;Nair et al., 2015;Tomizawa et al., 2020). Researchers like Bruton et al. (2021), Magni et al. (2022), and Shamim et al. (2021), acknowledge the essentialness of innovation in the of Asia Pacific context and explore the phenomenon in this region, constituting a knowledge community that characterizes and operationalizes the innovation processes purely based on local realities (Ananthram & Chan, 2021;Loon & Chik, 2019;Moradi et al., 2021;Ramdani et al., 2020;Tang et al., 2021;Wang et al., 2021;Zhao et al., 2020). The demand for innovation in the region is urgent, but companies are struggling to achieve it (Le & Lei, 2018). ...
The direct influence of digital platforms on organizational efficiency, financial performance, and strategy attracts the close attention of researchers. The complex mechanisms and pathways of digital platforms on transformation capacity, however, are still unclear at the global and Asia Pacific levels. Drawing on dynamic capability theory, we empirically explore how digital platforms augment organizational innovation performance. We advance the current literature on digital platforms by finding that digital platform capability boosts an organization’s dynamism and innovation performance. Furthermore, we extend the literature by revealing that, indirectly, innovation capability and strategic alignment have a substantial influence over digital platform capability and innovation performance. Finally, the study formulates a conceptual model from a dynamic capability perspective, rather than from a resource-based view, and test it using the responses collected from 153 Pakistani manufacturing firms.
