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.
Original language | English |
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Article number | 104476 |
Journal | Research Policy |
Volume | 51 |
Issue number | 4 |
DOIs | |
State | Published - May 2022 |
Keywords
- Anti-corruption policy
- Cash holding
- Institutional theory
- Political ties
- R&D