Title: The Political Economy of Innovation in China
Abstract: Firms in emerging economies like China must innovate to switch from copying products invented in advanced economies to creating innovative products themselves. But innovation is impeded when formal political-economic institutions are weak, as is common in emerging economies. To overcome weak formal institutions and foster innovation, some scholars argue that firms can use political connections. Other scholars argue instead that political connections impede, rather than foster, innovation. To test these opposing arguments, we focus on a common form of political connection: having former state officials serve as CEO or Chairman, the most powerful corporate positions. In addition to testing the main hypotheses, we assess two important regional contingencies: the strength of market development and rule of law. And we probe two causal mechanisms: the amount and effectiveness of R&D spending. Analysis of panel data on listed firms in China reveals that political connections impede innovation, especially when market institutions are well developed, due to ineffective R&D spending. But political connections do not affect how much firms spend on R&D. These findings indicate that it is politically connected executives’ lack of experience with innovation, rather than any tendency to avoid investing in R&D, that hampers innovation.
Biography: Heather A. Haveman is Professor of Sociology and Business at the University of California, Berkeley. She received a BA and MBA from the University of Toronto, and a PhD from UC Berkeley. Before coming to Berkeley in 2006, she taught at Duke (1990-94), Cornell (1994-99), and Columbia (1998-2007). She studies how organizations, industries, and employees’ careers evolve, and the impact of organizations on their employees and society at large. Her work combines insights from institutionalism, organizational demography, social movements, economic geography, micro economics, and social history. It has appeared in many journals, including the Academy of Management Journal, Administrative Science Quarterly, American Sociological Review, American Journal of Sociology, Organization Science, Law and Society Review, and Sociological Science, as well as in several edited books. Her book, Magazines and the Making of America: Modernization, Community, and Print Culture 1741-1860, was published by Princeton University Press in 2015.
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