Political Connection And Corporate Innovation

In recent years,my country is in the stage of transition from a big innovation country to a strong innovation country,which is the strategic focus of my country's future economic development.Enterprises are the main body of innovation and development.However,due to the long investment period,large amount,and uncertain output of enterprise innovation activities,it is often difficult for enterprises to meet the financial needs of innovation projects through internal financing.Financing is highly dependent.Moreover,due to the problems of high risk and information asymmetry in enterprise innovation,enterprises often face certain financing constraints when they conduct external financing.In China,the traditional financing system is too strong.So far,companies generally still rely on debt financing to obtain financial support.Most commercial banks or other financial institutions are controlled directly or indirectly by state-owned shares.Therefore,the government has a significant impact on the allocation of credit resources.In addition,because my country has not yet established a very perfect market mechanism,this institutional environment still requires enterprises to take informal means to obtain resources.This means that companies have long had a strong incentive to build political connections to obtain debt financing.Over time,political connections have gradually become an important aspect of business operations and strategic decisions.At present,in order to deepen the reform of the financial system and enhance the ability of the financial system to serve the real economy,China also needs to further increase the proportion of corporate direct financing and promote the healthy development of the capital market.In the context of my country's strong support for direct financing of enterprises,there is very little research on the impact of corporate political connections on equity financing.Therefore,this article believes that this issue is also worth exploring.In fact,enterprises can accumulate certain social resources and personal connections through political connections,which makes it easier for companies to obtain the identification and approval of relevant government departments when conducting direct financing.At the same time,political connections can also be used as a signal that the company has a good reputation The mechanism can attract equity investors to some extent,so political connections will also promote companies to conduct equity financing.It can be seen from the analysis that the enterprise's innovation process relies heavily on external financing,and the enterprise obtains external financing through political connection,so it can be inferred that external financing plays a role in the influence of political connection on corporate innovation.However,the existing studies rarely include the three in a unified framework for analysis,and there are few articles that deeply analyze the different effects of different political connections on the external financing of enterprises and the innovation output of enterprises.Therefore,the analysis of the mechanism of action among the three is particularly important in this article.Due to the limitation of slower update of relevant data,this article finally selected 2011-2017 China A-share listed companies as the research object to deeply explore the relationship between political connections,external financing,and corporate innovation,and analyze the intermediary mechanism of external financing between political connection and enterprise innovation.Based on the theoretical analysis and empirical research based on the data of China's A-share listed companies,the results found that:(1)Political connection is not conducive to enterprise innovation output.In addition,there are significant differences in the impact of different levels of political connection on corporate innovation output: Compared with companies that establish local political connections,the establishment of central political connections has a greater negative impact on corporate innovation output.(2)Political connections are conducive to corporate debt financing,and local political connections have a stronger positive impact on debt financing than central political connections.(3)Political connections are conducive to equity financing,and building a central political relationship has a more significant positive impact on equity financing than a local political relationship.(4)Both debt financing and equity financing are not conducive to corporate innovation output.(5)Both debt financing and equity financing play a part of the intermediary role in the relationship between political connections and corporate innovation output.And the intermediary effect of debt financing accounts for 2.6% of the total effect.The intermediary effect of equity financing accounts for 3.5% of the total effect.Through further research,it can be seen that the external social capital acquired by an enterprise is difficult to be converted into internal resources suitable for enterprise innovation.This prompts us to pay attention to other factors besides external financing that affect enterprise innovation,and conduct in-depth research on innovation leadership decisionmaking and enterprise management process to suppress and make up for the deficiencies caused by political connections.It should be noted that although political connections have a negative impact on enterprise innovation,in the period of China's economic transition,regardless of the degree of political connections established by enterprises,the association and collaboration between enterprises and governments have potential positive significance.For enterprises,the key lies in how to effectively exert the advantages of benign interaction between government and enterprises,try to avoid the negative effects brought about by political connections,turn crises into opportunities,and formulate reasonable political strategies.While implementing political strategies,enterprises should also pay attention to coordination with market strategies,improve their own absorption capacity,and transform external social capital into effective internal resources in a timely manner.Paying attention to coordination between inside and outside will be more conducive to enterprise improvement Innovation output.