Abstract

Based on various data of the private listed companies in China, this paper stuides the impact of political connections on corporate innovation capabilities. Political connection can improve corporate value, bring financing convenience, tax benefits as well as government subsidy to affiliated enterprises. On the other hand, political connection helps affiliated enterprises enter the monopoly industries, which weakens their willingness to engage in innovative activities. The empirical studies reveal that political connection has a negative innovation effect, due to it raises the entry level of entering barrier industry in affiliated enterprises.

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