Economics at your fingertips  

Corporate innovation and political connections in Chinese listed firms

Qingsong Hou, May Hu and Yuan Yuan

Pacific-Basin Finance Journal, 2017, vol. 46, issue PA, 158-176

Abstract: This paper examines the relationship between political connections and corporate innovation in China. We find that political connections hinder corporate innovation activities and reduce innovation efficiency, suggesting the existence of political resource curse effect on corporate innovation in Chinese firms. In addition, we find that political connections reduce market competition and increase firms' overinvestments, leading to the crowding out effect with the limited resources insufficiently and inefficiently allocated to corporate innovation in firms. We also find that political connections weaken the impact of corporate innovation on firm future performance. Nonpolitically connected firms with patent applications have better and more effective future business performance than politically connected firms. This study provides policy implications for policy makers to reduce government-led resource allocation, improve market-oriented innovation mechanism, and standardize government subsidies to make the allocation process more transparent, so that corporate technological innovation can lead to the regional and national economic growth.

Keywords: Corporate innovation; Political connections; China (search for similar items in EconPapers)
JEL-codes: G11 G28 G30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.pacfin.2017.09.004

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-08-06
Handle: RePEc:eee:pacfin:v:46:y:2017:i:pa:p:158-176