The double-edged sword effect of political ties on performance in emerging markets: The mediation of innovation capability and legitimacy

Abstract

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 marketfocused innovation capability and strengthened legitimacy mediate the effect of political ties on firm performance. In addition, to capture the nature of the relationship between political ties and performance, we adopt a contingency perspective in our examination of the moderating roles of legal enforceability and competitive intensity. Specifically, we suggest that legal enforceability buffers the negative impact of political ties on marketfocused innovation capability but mitigates the positive impact of political ties on firm legitimacy. Moreover, competitive intensity enhances the positive impact of marketfocused innovation capability and firm legitimacy on firm performance. We test our hypotheses using a survey with 362 respondents in China. In conclusion, our findings provide important insights into how Chinese firms effectively utilize political ties to improve their performance.

Pursuing opportunities in distance: the determinants of overseas R&D by Chinese multinationals

“…Figures 2a and 2b depict the significant and negative moderating effect of host country IPR protection, which further provides support for H3a and H3b. Consistent with previous studies (Martínez-Noya and García-Canal, 2011;Wang et al, 2019b), we further evaluated the marginal effects of knowledge and economic distance on overseas R&D intensity under the context of low or high IPR protection (i.e., Mean ± 1 SD). The results (see Table 5) show that the marginal effects of knowledge and economic distance on overseas R&D intensity are positive and significant (β = 0.015, P < .05; β = 0.027, P < .05) when IPR protection is low; however, the marginal effects are negative and significant (β = − 0.006, P < .05; β = − 0.007, P < .01) when IPR protection is high.…”

Entrepreneur’s political involvement and inter-organizational conflict resolution in China’s transition economy

“…The effects of political involvement on firm performance is deemed to be complicated and the results of previous studies are contradictory (Li et al, 2008;Wang et al, 2019). High level of political involvement dese not guarantee better outcomes of conflict management.…”

The Ambivalence of Power in the Twenty-First Century Economy

“…I categorize these studies into two groups. The first includes the legitimacy of innovation when a new market for a new product emerges (Navis and Glynn 2010; Markarda et al 2016;Wang et al 2019). The second focuses on the legitimacy of innovation in particular companies or any other agents (Blanco et al 2013;Petkova 2018;Schoon and DeRoche 2019).…”