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Does Political Activism Matter for Firm Innovation Capability?

Current research on the influence of corporate political activism on innovation presents a
dual perspective. Zhong and Zheng (2025) highlight that corporate political connections
exert two effects on innovation: a “resource provision” mechanism, whereby firms gain
resources through political connections to reduce innovation risks, and a “rent-seeking”

mechanism, whereby political connections impose constraints, leading firms to sacrifice
innovation for political advantages. Moreover, Zhao, Ni, and Liu (2024) noted that the
impact of political connections on corporate innovation remains uncertain. Although

political connections can help firms secure government resources and reduce uncertainty
regarding innovation policies, they may also lead to unnecessary investments to maintain
these connections, thereby increasing social burdens.
In Taiwanese political practice, legislators are directly elected representatives of the
people who hold legislative power. Because the legal basis for government policies must

be authorized by the legislature, legislators are motivated to serve their constituents’ needs
and to pass relevant laws to secure re-election (Sheng, 1997). Therefore, this study argues
that firms that make political donations during elections employ a more direct means of

engaging in political activism in exchange for potential political resources and benefits.
Furthermore, following the implementation of the Political Donations Act in Taiwan,
political contribution data from profit-seeking enterprises must be submitted to and
publicly reported by the Control Yuan, providing a channel to identify firms that engage
in political activism and approach politicians. This study hypothesizes that when firms

engage in political activism and seek to establish political connections with legislators,
it may indirectly influence the policy guidelines of administrative agencies. This could
enable firms to gain early access to political information, respond to future changes in

the political and economic environment, and strategize for innovative policies. However,
corporate political activism may also divert funds from innovation budgets and increase
political costs, making firms more vulnerable to political interference and creating a
“political resources curse.” Therefore, as previous research has not yet clearly outlined
the advantages and disadvantages of corporate political activism on corporate innovation,

this study focuses on corporate political activism through political donations in legislative
elections to investigate its impact on innovation capabilities.

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