Innovation quantity or quality? The role of political connections

Based on the heterogeneity of innovation quantity and quality, this study investigates the impact of political connections on enterprises' innovation. Using the data of Chinese listed enterprises from 2003 to 2015, we find that political connections have a positive impact on enterprises' innovation quantity, but they are detrimental to innovation quality. We further find that political connections weaken the promotion of government subsidies on innovation quality and even reduce the R&D intensity of enterprises, which serves as an essential determinant of innovation quality. The government can stimulate enterprises' innovation quality by improving marketization, intellectual property protection, and anti-corruption.

Automated summary

The study found that political connections have a positive impact on enterprises' innovation quantity but are detrimental to innovation quality. Political connections weaken the promotion of government subsidies and reduce the R&D intensity of enterprises, which are essential factors of innovation quality. The government can stimulate enterprises' innovation quality by improving marketization, intellectual property protection, and anti-corruption measures.