Article
Political tie hot potato: The contingent effect of China's anti-corruption policy on cash and innovation
Research Policy
(2022)
Abstract
In this study, we combine the resource-based view (RBV) with institutional theory to examine how a firm’s cash holding affects its innovation investments and outcomes and explore the contingent roles of political ties and the national anti-corruption policy. Using 18,125 firm-year observations of Chinese firms from 2007 to 2016, we
reveal a three-way interactive effect of cash holding, political ties, and the anti-corruption policy on innovation.
Before the policy is implemented, cash holding has the greatest positive effect on R&D investment for politically
connected firms, and after the implementation this positive effect for these firms is strongest for R&D outcomes.
We propose that the logic of resource utilization efficiency implied by the anti-corruption policy strongly motivates politically connected firms to convert their R&D investment into actual output. The theoretical and practical implications are discussed.
Keywords
- Cash Holding,
- Political Ties,
- Institutional Theory,
- Anti-Corruption Policy,
- R&D
Disciplines
Publication Date
May, 2022
DOI
10.1016/j.respol.2022.104476
Citation Information
Lu, F., Zhu, Z., Zhu, L., & Gao, H. (2022). Political tie hot potato: The contingent effect of China's anti-corruption policy on cash and innovation. Research Policy, 51(4), Article 104476. https://doi.org/10.1016/j.respol.2022.104476