On the duality of political and economic stakeholder influence on firm innovation performance: Theory and evidence from Chinese firms

Jing Li, Jun Xia*, Edward Zajac

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

262 Scopus citations

Abstract

Research Summary: In this study, we propose and test a multi-stakeholder perspective to address variation in innovation performance across firms. Specifically, we analyze how a focal firm's innovation performance is shaped by its political stakeholders (local and central governments) and economic stakeholders (suppliers, buyers, and competitors). Using a data set consisting of over 26,400 Chinese firms, we first find support for our predictions that a focal firm's innovation performance will be enhanced by both its government connections and the innovativeness of its economic stakeholders. We then analyze whether the interdependent effect of these political and economic stakeholders is more likely to be synergistic versus antagonistic, and find evidence consistent with the antagonistic view. Managerial Summary: We show how a firm's innovativeness is influenced strongly by its relationships to external stakeholders. Specifically, we examine the potentially dual-edged role of political stakeholders (local and central governments) and economic stakeholders (suppliers, buyers, and competitors). Using extensive data on Chinese firms, we find: (a) that the higher the level of government connections, the greater a firm's innovativeness; (b) that firms located in proximity with more innovative economic stakeholders also tend to have higher innovation performance. We also look beyond these independent positive effects to examine the joint effect of these two forms of stakeholder influence, and here we see that more influence is not always better. Specifically, we find that the innovation benefit that typically accrues to firms in proximity to more innovative economic stakeholders is weakened when those firms also have higher-level government connections.

Original languageEnglish (US)
Pages (from-to)193-216
Number of pages24
JournalStrategic Management Journal
Volume39
Issue number1
DOIs
StatePublished - Jan 2018

Funding

We thank SMJ Co-Editor Constance Helfat and two anonymous reviewers for their insightful comments and suggestions. We are grateful for funding support from the Canada Research Chairs program, from the Social Sciences and Humanities Research Council of Canada, and from the National Natural Science Foundation of China (Grant 7142 1002). We also thank Marshall S. Jiang for providing the primary data for the analysis. National Natural Science Foundation of China, Grant/Award number: Grant 7142 1002; Social Sciences and Humanities Research Council of Canada; Canada Research Chairs program

Keywords

  • external innovativeness
  • firm innovation performance
  • multi-stakeholder perspective
  • political connections

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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