Sustainability (2018-11-01)

Can Political Connections Maintain the Sustainability of R&D Investment in China? There Is No Such Thing as a Free Lunch

  • Langzi Chen,
  • Jian Li,
  • Peter Zander

DOI
https://doi.org/10.3390/su10114238
Journal volume & issue
Vol. 10, no. 11
p. 4238

Abstract

Read online

Combining resource-based theory and social exchange theory, this paper studies the role that political connections play in maintaining the sustainability of enterprises’ R&D investment. Furthermore, this paper discusses the moderating effect of policy burdens and ownership on political connections and R&D investment. Based on the Euler equation model, this study used dynamic panel data from Chinese listed companies over the period 2006⁻2015 to test the hypothesis. The results show that the sustainability of R&D investments of enterprises are more likely to face the threat of financing constraints. However, political connections can help maintain the sustainability of R&D investment of enterprises, but this effect exists only at the local political level, and firms need to undertake a policy burden in return. Additionally, this effect is more effective in private enterprises than non-private enterprises.

Keywords