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Can Political Connections Maintain the Sustainability of R&D Investment in China? There Is No Such Thing as a Free Lunch

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  • Langzi Chen

    (Management School of Nanjing Forest Police College, No. 28, Wenlan Road, Qixia District, Nanjing 210046, China)

  • Jian Li

    (School of Business, Nan Jing Normal University, No. 1, Wenyuan Road, Qixia District, Nanjing 210023, China)

  • Peter Zander

    (Institute of Socio-Economics of Leibniz Centre for Agricultural Landscape Research, Eberswalder Str. 84, 15374 Müncheberg, Germany)

Abstract

Combining resource-based theory and social exchange theory, this paper studies the role that political connections play in maintaining the sustainability of enterprises’ R&D investment. Furthermore, this paper discusses the moderating effect of policy burdens and ownership on political connections and R&D investment. Based on the Euler equation model, this study used dynamic panel data from Chinese listed companies over the period 2006–2015 to test the hypothesis. The results show that the sustainability of R&D investments of enterprises are more likely to face the threat of financing constraints. However, political connections can help maintain the sustainability of R&D investment of enterprises, but this effect exists only at the local political level, and firms need to undertake a policy burden in return. Additionally, this effect is more effective in private enterprises than non-private enterprises.

Suggested Citation

  • Langzi Chen & Jian Li & Peter Zander, 2018. "Can Political Connections Maintain the Sustainability of R&D Investment in China? There Is No Such Thing as a Free Lunch," Sustainability, MDPI, vol. 10(11), pages 1-19, November.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:11:p:4238-:d:183417
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