Research on Corporate Political Activity in the Emerging Market and Its Influence on Innovation--Evidence from China

新興市場中的企業政治行為及其對創新的影響機理研究--來自中國的證據

Student thesis: Doctoral Thesis

View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Awarding Institution
Supervisors/Advisors
Award date28 Aug 2020

Abstract

In emerging markets, innovation has become the driving force of corporate development and a necessary activity to cope with fierce competition. However, the institutional environment in emerging markets is not yet complete, and providing adequate resource support and institutional protection for innovation is difficult. Therefore, corporate political activity (CPA) has become an important strategic behavior that enables firms to conduct innovative activities in emerging markets. However, existing research on the antecedents and effects of CPA has not reached a unanimous conclusion with regard to this issue; how firms decide to participate in political activity in emerging markets remains unclear, and an inconsistency exists as to how CPA affects innovation performance in specific situations. At the same time, no conclusions are available about the mechanism and boundary of the influence of CPA on innovation performance. Dispersed research perspectives, distinctive research scenarios, and inconsistent research results lead to inadequate understanding of CPA and its impact. Clarification of these issues will help firms make smart strategic decisions according to internal and external environments to make full use of existing resources and promote innovation performance. Accordingly, this dissertation will explore the influencing factors and mechanism of engagement in CPA in emerging markets and further test the impact of such activity on innovation performance and its effect boundary in the biopharmaceutical industry in those markets. In more depth, this dissertation focuses on the original innovation of new drug research and development and discusses the impact and underlying mechanism of CPA on the specific type of innovation.

Specifically, the main research content of this dissertation is reflected in three aspects.

First, how does a firm’s ability and willingness factor affect its political activity? Existing research has explored the motives of firms’ participation in political activities from many theoretical perspectives and research levels. However, the explanation power provided by these investigations is insufficient and inconsistent conclusions are reached. Furthermore, these studies mostly take firms’ participation in political activity for granted, without an in-depth analysis of the micro process of firms’ decision-making process to participate in political activity. Therefore, this study first explores how the ability and willingness of firms together affect their political activity within firms. This study takes organizational slack as the representative of organizational ability and discusses its influence on CPA. In particular, this study innovatively incorporated organizational will, namely, strategic orientation, into the research on the influencing factors of CPA to explore how the entrepreneurial tendency of organizational managers and their attitude toward risk affect CPA. On the basis of behavioral theory of the firm, this dissertation develops a mediation model that includes organization ability (slack), willingness (entrepreneurial orientation [EO]), and CPA to investigate the effect of different types of slack on CPA and the mediating effect of different dimensions of EO. Using data of 303 companies in China, this dissertation reveals interesting findings: Organizational slack plays an important role in promoting participation in CPA, and this effect could be mediated by organizational willingness, namely, EO. Moreover, two sub-dimensions of EO have heterogeneous mediating effects according to their different emphases. This study also responds to the appeal for the incorporation of organizational willingness into the investigation of CPA and discusses the role of firm’s ability and willingness in promoting CPA for the first time. Furthermore, the exploration of the influence of a firm’s ability and willingness to engage in CPA expands research on the behavioral theory of the firm. Based on the behavioral theory of the firm, this part integrates ability (slack) and willingness (strategic orientation) together for the first time to tackle the decision process within the firm, and to explore the effect of different types of slack and strategic orientation and their relationship toward firm’s engagement in CPA in emerging markets (China), which enriches the research on the stream of CPA participation based on the ability-will-activity paradigm.

Second, how does CPA affect innovation performance? Existing studies have inconsistent conclusions on the relationship between CPA and innovation performance, and research on the boundary conditions of the relationship is lacking. Therefore, in the context of the pharmaceutical industry in emerging markets, this study explores the relationship between CPA and innovation performance, as well as the boundary factors that influence this relationship. Following institutional theory and information ecology theory (which is derived from institutional theory), this dissertation explores the impact of CPA on firm’s innovation performance and its boundary conditions. This work used the matched data of 227 Chinese pharmaceutical companies and two secondary databases and found that CPA promotes the innovation performance of firms. Strong internal knowledge utilization capability and strategic flexibility of a firm could complement the beneficial effect of CPA on innovation performance. However, a more developed information technology environment would weaken the beneficial effect of CPA on innovation performance. The research conclusion clarifies the influence of CPA on innovation performance in specific situations, expands research on the boundary conditions, and provides guidance for firms to undertake political activity and innovation strategy. This study also discusses the influence of information technology environment on the relationship between CPA and innovation performance, which enriches not only the research on the influence of information technology development but also the research on the relationship between information technology and institutional environment. This part studies the positive impact of CPA on innovation performance in the specific context of Chinese pharmaceutical industry, and it introduces the internal capabilities and external information technology environment of the firm to explore the heterogeneous moderating effect on the relationship between CPA and innovation performance. More importantly, this research explores the negative moderating effect of the development of the information technology environment on the implementation of CPA for the first time, and it clarifies some of the boundary conditions of the implementation of CPA systematically. This research also confirm that the development of the information technology environment is conducive to the healthy development of political and commercial relations.

Third, in the context of the emerging market’ pharmaceutical industry, original innovation (such as new drug discovery) plays an important role for firms, industries, and even countries. Therefore, this study further focuses on such kinds of original innovation and explores the influence of CPA on original innovation. This paper constructs a mediating model of knowledge management to explore the mechanism of CPA on original innovation. The data of 227 pharmaceutical firms indicates that CPA promotes the original innovation of firms through the process of knowledge acquisition and knowledge utilization. Knowledge management plays a mediating effect, while knowledge utilization plays multiple mediating roles. The theoretical discussion and empirical test in this article clarify the path of the role of CPA in pharmaceutical companies, expands the research perspective of the effect of CPA, and emphasizes the important effect of knowledge management. In the specific context of Chinese pharmaceutical industry, this part starts from the basic element of innovation, knowledge, and introduces the perspective of knowledge management to analyze the impact mechanism of CPA on original innovation. It is found that knowledge acquisition and knowledge utilization are important mediators between CPA and original innovation. This research enriches the research perspectives with which scholars explore the impact of CPA on innovation performance, meanwhile, it refines the impact of CPA on specific innovation types in specific situations.

In general, this study focuses on the micro process of CPA in emerging markets and explains how firms participate in political activity through the perspective of organizational ability and willingness. Furthermore, this dissertation clarifies the influence of CPA on innovation performance, the boundary factors that influence the relationship, and the underlying mechanism of the effect in the context of the pharmaceutical industry. This research deepens and expands the research on the influencing factors and results of CPA and also enriches the literature on the behavioral theory of the firm, institutional theory, and the resource-based view in the study of CPA. This dissertation also provides useful guidance for firms to participate in political activities and take advantage of CPA to promote innovation performance.

    Research areas

  • Corporate political activity, Innovation performance, Pharmaceutical industry, Knowledge management, Information technology environment