| Abstract: |
We posit that the investments in political connections made by a firm in an
emerging market will impact differently its propensity to introduce radical
and incremental innovations. In addition, we argue that this effect will be
moderated by alternate non-market firm strategies, such as bribery. Using a
dataset of more than 9,000 firms in 30 emerging economies from Eastern Europe
and Central Asia we find that political connections increase the probability
of radical innovation but have no significant impact on incremental
innovation. Moreover, larger bribing reduces the positive impact of political
connections on radical innovation. Our results confirm the importance of
political connections for firm activities, but also caution firms on their
heterogeneous impact on various types of innovations, and their detrimental
interplay with other non-market strategies. |