Diverse human resource slack and firm innovation: Evidence from politically connected firms

Abstract

This study explores how political connections help firms promote innovation in emerging markets by facilitating the acquisition of required resources and knowledge and establishing collaborative relationships with external partners. Further, we emphasize that reconfiguration and acquisition of resources and knowledge are critical for firms to seize the opportunities by focusing on the role of human resource (HR) slack and state ownership in the innovation process. By specifying the HR slack based on the accumulated knowledge and experience of employees, we explain that the way firms integrate the resources and knowledge from political connections with an appropriate type of HR slack critically affects firm innovation. We also argue that state ownership strengthens the capabilities of politically connected firms to acquire resources and knowledge for firm innovation because political connections and state ownership enable firms to establish a dual pathway to access resources and knowledge. Based on data from 3229 Chinese listed firms over a decade, our findings show the importance of highly-skilled HR slack to adequately allocate and absorb the resources and knowledge from political connections to foster firm innovation. The results also highlight the significance of state ownership in promoting innovation within politically connected firms.