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Does the Political Promotion of Local Officials Impede Corporate Innovation?

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  • Li Wang
  • Dongmin Kong
  • Jian Zhang

Abstract

This study investigates the impact of government officials’ political promotion on the innovation of local firms in China. We find that local firms tend to avoid risky long-term investment in innovation when local government officials are conservative and short-term-oriented during promotion tournaments. Causality is established using the Chinese cities’ Air Quality Index (AQI) to construct the instrumental variable of local politicians’ promotion incentives. We further show that such negative effect is highly significant in state-owned enterprises, firms with political connections, and firms located in low-marketization regions. Our results are robust to a variety of model specifications and subsample analyses.

Suggested Citation

  • Li Wang & Dongmin Kong & Jian Zhang, 2021. "Does the Political Promotion of Local Officials Impede Corporate Innovation?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(4), pages 1159-1181, March.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:4:p:1159-1181
    DOI: 10.1080/1540496X.2019.1613223
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    Cited by:

    1. Ruiqian Li & Guanghua Xu & Ramakrishnan Ramanathan, 2022. "The impact of environmental investments on green innovation: An integration of factors that increase or decrease uncertainty," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3388-3405, November.
    2. Cao, Dongqin & Peng, Can & Yang, Guanglei & Zhang, Wei, 2022. "How does the pressure of political promotion affect renewable energy technological innovation? Evidence from 30 Chinese provinces," Energy, Elsevier, vol. 254(PA).
    3. Xie, Dongshui & Bai, Caiquan & Zhang, Yuwei, 2023. "Relation-based governance, financial crisis shock, and economic growth in China," Economic Modelling, Elsevier, vol. 129(C).
    4. Wang, Ping & Wang, Xiaochun & Wu, Jie, 2023. "Executives' regulatory experiences and corporate social responsibility," Finance Research Letters, Elsevier, vol. 55(PB).
    5. Yingzheng Yan & Qiuwang Cheng & Menglan Huang & Qiaohua Lin & Wenhe Lin, 2022. "Government Environmental Regulation and Corporate ESG Performance: Evidence from Natural Resource Accountability Audits in China," IJERPH, MDPI, vol. 20(1), pages 1-16, December.
    6. Li, Ruiqian & Ramanathan, Ramakrishnan, 2024. "The interactive effect of environmental penalties and environmental subsidies on corporate environmental innovation: Is more better or worse?," Technological Forecasting and Social Change, Elsevier, vol. 200(C).

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