Radical innovation, market forces, political and business relationships

Purpose – This study aims to investigate the relationships between radical innovation, market forces and political/business relationships in China by combining social capital theory and contingent theory. The paper focuses on how two types of managerial ties (i.e. business and political ties) impact firms’ capacity for radical innovation. It also examines the different moderating effects of market forces (i.e. demand uncertainty, technological turbulence and competitive intensity) on the linkage of managerial ties with radical innovation in the Chinese transitional context. Design/methodology/approach – A systematic literature review on managerial ties, radical innovation and market forces in emerging markets provides the theoretical foundation of our conceptual model and hypothesis. Using a survey sample of 119 Chinese firms, the authors conduct a regression analysis on the theoretical model and hypotheses. Findings – The results show that business ties have an inverted U-shape effect on radical innovation, while political ties have a positive impact on radical innovation. Furthermore, the market forces in transitional economies (i.e. demand uncertainty, technological turbulence and competitive intensity) have different moderating effects on the relationships between two types of managerial ties and Chinese firms’ radical innovation. Research limitations/implications – This study adopts its data set from the Chinese context. It would be necessary to replicate this research in other transitional economies because of specific differences between China and other transitional economies. Practical implications – Findings from our study indicate that firms which wish to succeed in radical innovation may need to adapt their tie-based strategies according to different market settings. Originality/value – The paper is original in its comparative investigation of the effect of business ties and political ties on radical innovation in contingent transitional market environments using a combination of social capital and contingent theories.