Does SMEs’ Political Ties Influence Innovation Performance?Exploring The Mediating Effects Of Resource Acquisition

In the fast-changing and highly-competitive global market, how to drive small-and medium-sized enterprises’(SMEs) to innovate is becoming an indispensible issue faced with a transition economy. On the one hand, innovation of SMEs has been the engine of economic growth and technological process to a country; on the other hand, the particular institution within a transition economy makes it more complex for SMEs to innovate. To be specific, the incompleteness of financial regulations exerts huge difficulties for SMEs to acquire external innovation resources through market mechanism.Focusing on the topic of SMEs’ innovation, this article studies enterprises’ political ties, which exert strong influences on SMEs’ innovation activity but receive little attention from researchers. Undoubtedly, the way political ties affect enterprises’ innovation differs a lot with other partnerships, such as suppliers, customers, intermediaries, universities, etc.. Based on literature review of SMEs’ innovation characteristics, including barriers and advantages of SMEs’ innovation, and of firms’ political ties and their effect to firms, we capture the important mechanism of resource acquisition, through which a firm’s political ties affect its innovation performance. Late we have an empirical research based on a sample of SMEs in Zhejiang Province in China. The results reveals that:(1) enterprises’ political ties have significant positive impact to SMEs’ innovation performance;(2) enterprises’ political ties can significantly help SMEs to acquire resources from governments, including resources of assets and information;(3) the resource acquisition from government, including resources of assets and information, can significantly help SMEs to promote innovation performance;(4) the way enterprises’ political ties positively influence SMEs’ innovation performance is through the mediation effect of resource acquisition, specifically, through the mediation effect of asset resource acquisition.This study answers the research question of whether and how political ties positively affect SMEs’ innovation performance. Through focusing on SMEs and in transition economy, we reply the inconsistency of current studies concerning political tries’ influence to enterprises’ innovation. In addition, this article shed light on ways for SMEs to promote innovation performance and gives practical suggestions.