Does Investment in Managing Stakeholder Relationships Affect Innovation? Evidence from China

61 Pages Posted: 30 Aug 2021 Last revised: 16 Jan 2024

See all articles by Juncheng Hu

Juncheng Hu

Bond University

Xiaorong Li

Central University of Finance and Economics (CUFE)

Lijuan Zhang

Australian National University

Date Written: August 8, 2021

Abstract

This study investigates whether investment in managing stakeholder relationships impedes or improves corporate innovation. We provide evidence that relationship investment through business entertainment activities positively influences corporate innovation in China. The evidence is robust to the use of a quasi-natural experiment that relies on the 2012 anti-corruption campaign as an exogenous shock to relationship investment. Further mediation analysis shows that relationship investment enhances corporate innovation by helping firms acquire more resources, including government subsidies, customer sales, and supplier trade credits, whereas the anti-corruption campaign curbs the positive role of relationship investment in obtaining the above resources. Our study offers novel evidence on how investment in stakeholder relationships affects corporate innovation.

Keywords: relationship investment; innovation; anti-corruption campaign; guanxi

Suggested Citation

Hu, Juncheng and Li, Xiaorong and Zhang, Lijuan, Does Investment in Managing Stakeholder Relationships Affect Innovation? Evidence from China (August 8, 2021). Available at SSRN: https://ssrn.com/abstract=3901359 or http://dx.doi.org/10.2139/ssrn.3901359

Juncheng Hu (Contact Author)

Bond University ( email )

98 University Drive
Robina, QLD 4226
Australia

HOME PAGE: http://research.bond.edu.au/en/persons/juncheng-hu

Xiaorong Li

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Lijuan Zhang

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

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