Page 164 - 36-1

Does Political Activism Matter for Firm Innovation Capability?

in exchange for political benefits (Zhong and Zheng, 2025). Moreover, this study finds
that firms in the electronics industry strengthen the negative relationship between political
activism and corporate innovation. These findings further suggest that, although the
Taiwanese government provides substantial subsidies and supportive policies for the

electronics industry, firms are more strongly influenced by the government, resulting in a
more pronounced “curse of political resources” that impacts their innovation capacity.
Second, from the business perspective, political donations are the most direct

means of building political connections and an important method for firms to engage
with politicians. This study finds that political connections can lead to the crowding out
of political resources, consistent with the “curse of political resources hypothesis” (Hou
et al., 2017). The results indicate that political connections can serve as a “rent-seeking”
mechanism, negatively impacting corporate innovation capabilities. These findings fill a

gap in the Taiwanese literature by examining the relationship between corporate political
activities and the efficiency of resource allocation.
Finally, innovation capability is crucial for firms to remain competitive and achieve

growth, serving as a foundation for industrial development. In particular, corporate
innovation investment and research and development input may depend on government
regulations and policies. Our results suggest that firms should not rely excessively on
political activism to gain protection through political connections. Instead, firms should
focus on building relationship capital through political connections as a resource to

support innovation and growth.

156