Journal of Business Research 146 (2022) 375–384

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Journal of Business Research

journal homepage: www.elsevier.com/locate/jbusres

Political connections and green innovation: The role of a corporate

entrepreneurship strategy in state-owned enterprises
Cheng Zhang a, Bo Zhou a, b, *, Xuan Tian c
a
School of Finance, Nanjing University of Finance and Economics, Nanjing 210023, China
b
College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, China
c
School of Economics, Nanjing University of Finance and Economics, Nanjing 210023, China

A R T I C L E I N F O A B S T R A C T

Keywords: A growing body of literature recognizes the critical impact of political connections on enterprises’ green inno­
Political connections vation. This study enriches the literature by arguing that a corporate entrepreneurship strategy could plausibly
Green innovation have an unexamined mediating role between political connection and green innovation. By regressing the data of
Corporate entrepreneurship strategy
Chinese pollution-intensive companies from 2011 to 2019, the empirical results support this argument but only
China
State-owned enterprises
for state-owned enterprises. Politically connected SOEs promoted green patent authorizations through corporate
entrepreneurship strategies. Furthermore, the results remained robust after a battery of checks. Notably, the
higher the political connection level is, the more significant is the role. Political connections increased entre­
preneurship investments in research and development and organizational capital, promoting green innovation in
SOEs; therefore, policymakers could leverage the entrepreneurship investment effects of political connections to
encourage SOEs’ green innovation.

1. Introduction
Green innovation refers to inventions that are intended to advance
environmental sustainability; therefore, it is a critical approach that
pollution-intensive firms can use to achieve win–win outcomes for both
economic activity and environmental benefit (Zhai & An, 2020; Zhao
et al., 2022). The characteristics of some executives (such as political
connection) substantially influence firms’ decision-making regarding
engagement and investment in green innovation processes (Faccio et al.,
2006). Political connection is defined in this study as executives that are
current or former government bureaucrats, who served or are serving as
an officer of the government or the military (Fisman, 2001; Fan et al.,
2007). Corporate executives with political experiences are very common
in many countries (Pagano & Volpin, 2005); hence, political connection
is presumably critical to corporate green innovation processes.
With regard to the relationship between political connection and
green innovation, some previously related theories and literature hold
opposing views. From the perspectives of corporate social responsibility
and governmental regulation, scholars have found that political
connection induces positive impacts on corporate environmental re­
sponsibility, generating more capital investment in green innovation.
This impact is more significant under more stringent environmental
regulations (Zhang, 2017; Huang et al., 2021). Conversely, some nega­
tive conclusions have suggested that political connection is not condu­
cive to green innovation. Based on the rent-seeking theory, politically
connected firms may obtain more environmental policy information to
evade governmental supervision and subsequently have less motivation
to engage in green innovation (Li et al., 2008; Deng et al., 2020). The
rent-seeking cost of political connection may also crowd out some
original investment in green innovation (Chen et al., 2011). The com­
mon ground of the above studies is that they are all from the perspective
of firms’ external governance environment.
However, a corporate entrepreneurship (CE) strategy is a factor
neglected by previous studies; that is, a perspective of firms’ internal
governance environment. According to Ireland et al. (2009) and He et al.
(2020), a CE strategy is the panacea for a firm’s sustainable economic
development. A CE strategy implies a firm’s strategic intent to contin­
uously and deliberately leverage entrepreneurial opportunities for
growth. Such strategies have advantage-seeking purposes through
tactical renewal, innovation, and corporate venturing (Chen & Liu,
2020; Metallo et al., 2021; Kusa et al., 2021). A CE strategy includes
investing in research and development (R&D), brand equity, organiza­
tional capital, and human capital and may have a significant impact on
the decision-making and resources related to green innovation (Méndez-

* Corresponding author at: 3 Wenyuan Road, Nanjing 210023, China.

E-mail address: a9z8v5@163.com (B. Zhou).

https://doi.org/10.1016/j.jbusres.2022.03.084
Received 22 November 2021; Received in revised form 25 March 2022; Accepted 28 March 2022
Available online 4 April 2022
0148-2963/© 2022 Elsevier Inc. All rights reserved.
C. Zhang et al.
Picazo et al., 2021). In addition, the working experiences of executives
have been confirmed to partly explain CE strategy decisions (Glaeser
et al., 2015; Goduscheit et al., 2021). However, there is a research gap
regarding CE strategies in existing studies on political connection and
green innovation, which represents a cognitive limitation of related
knowledge. This study endeavors to fill this gap by investigating the
mediating role of a CE strategy.
China provides a good context for investigating the role of a CE
strategy. Politically connected executives are a common occurrence
across Asia, particularly in Chinese firms (Pagano & Volpin, 2005). The
large number of politically connected executives in Chinese firms pro­
vides an appropriate sample for investigating the impact of political
connection. Additionally, faced with rising public concern and envi­
ronmental governance induced by severe domestic environmental
pollution (Zhang et al., 2022a; Zhang et al., 2022b), Chinese firms are
vigorously developing environmentally friendly technologies, and
therefore are able to independently address the pollution that they
originally caused while still maintaining their economic activities.
Furthermore, the large number of searchable green patents from Chinese
firms offers an appropriate sample as a proxy for firm-level green
innovation for this study (Zhao et al., 2022).
China also poses a challenge for investigating the role of CE strategies
because of the significant number of state-owned enterprises (SOEs) and
the significant difference between the SOEs and non-state-owned en­
terprises (non-SOEs) in China. For instance, SOEs are subjected to
relatively heavier government intervention than non-SOEs (Fan et al.,
2007); hence, SOEs’ CE strategies may be more significantly influenced
by political connections than those of non-SOEs. To address the possible
biased results induced by enterprises’ ownership, this study distin­
guishes between SOEs and non-SOEs.
The significant variety in the levels of officers in China generates
another challenge. The Chinese government system is a hierarchical
administrative structure, in which each level of the state bureaucracy
has different administrative powers and authority in policymaking (Li &
Zhou, 2005). Executives with different levels of political connections
may adopt different entrepreneurial orientations based on the different
administrative environments they are exposed to; therefore, this study
also differentiates the levels of political connections during its
investigation.
This study has three goals. First, the study endeavors to examine the
mediating role of a CE strategy between political connection and green
innovation. Second, this study endeavors to address the two challenges
raised by the Chinese sample, covering the potential heterogeneous re­
sults induced by SOEs and political connection levels. Third, this study
endeavors to examine the roles of four subcategories of CE strategies,
and thus evaluate the specific mediating role of each subcategory.
This study mainly speaks and contributes to two categories of
existing literature. First and foremost, as noted above, this study pro­
poses the novel perspective of CE strategies to explain the relationship
between political connection and green innovation. Previous literature
primarily examines this relationship from the perspective of firms’
external governance environment, such as environmental regulations
(Huang et al., 2021; Zhang et al., 2019a). In sharp contrast, minimal
systematic knowledge exists on factors related to firms’ internal gover­
nance environment. Therefore, this study extends this strand of litera­
ture by investigating the role of CE strategy.
Second, this study adds to the discussion on SOEs’ green innovations
by investigating political connections. A growing body of literature ex­
amines the characteristics of both executives and boards as related to the
promotion of SOEs’ green innovation (Usman et al., 2020; Ren et al.,
2021). This study complements the existing literature by focusing on the
characteristic of political connection, which exists widely in Chinese
SOEs. Previously investigated characteristics, such as executive gender
and hometown origins, may be related to discrimination. A study on
political connection can provide insights for promoting SOEs’ green
innovation through government appointment, without the inclusion of
376
Journal of Business Research 146 (2022) 375–384
any debate on discrimination.
In what follows, this study first develops hypotheses based on the
literature review, then introduces the study’s methods and data. Next,
this study presents the empirical results and discussion, and corre­
spondingly summarizes the conclusions and policy implications.
2. Literature review and hypotheses development
2.1. Political connection and CE strategies
Politically connected enterprises are widespread in many countries,
particularly in transitional and developing countries (Faccio, 2006).
Regarding approaches to build and maintain political connections, there
are significant differences between SOEs and non-SOEs, and these dif­
ferences can lead to different impacts on CE strategies.
In SOEs, the impact of political connections on CE strategies may be
positive. The executives of Chinese SOEs are appointed by the govern­
ment; therefore, there is no extra cost for SOEs to seek and maintain
political connections (Boubakri et al., 2013). Moreover, the executives
in Chinese SOEs are also current government bureaucrats. This charac­
teristic implies one important consideration that these executives have
the possibility of being promoted to upper-level positions. Based on the
tournament competition hypothesis (Li & Zhou, 2005; Yu et al., 2016),
the likelihood of promotion to an upper-level position causes executives
to conduct a positive strategy to achieve superior corporate perfor­
mance. This occurs because upper-level governments mainly evaluate
executives based on corporate performance. From this perspective,
SOEs’ political connections motivate investment in CE strategies.
Owing to the five layers of state administration that broadly compose
China’s political system, including the center (zhongyang), provinces
(sheng), prefectures (diqu), counties (xian), and townships (xiang) (Li &
Zhou, 2005), political connection can also be divided based on these five
layers. Executives with higher levels of political connection are more
well-known to the public, and they may also be more responsible for
their enterprises’ development (Li et al., 2008). Additionally, higher
levels of political connection in SOEs imply access to a considerable
amount of resources and administrative power. As such, executives may
readily acquire the additional resources need to adopt a CE strategy
(Zhang et al., 2019a). From this point on, a higher political connection
level will more significantly motivate SOEs’ CE strategies.
As for non-SOEs, executives seek to leverage government connec­
tions, primarily for political protection and associated economic benefits
(Fan et al., 2007). In the process of building and maintaining these
connections, the non-SOEs must pay rent-seeking costs to policymakers,
according to the rent-seeking theory (Shleifer & Vishny, 1994; Hellman
et al., 2003). This method of building and maintaining connections may
crowd out original investment in CE strategies (Fethi & Imamoglu,
2021). After non-SOEs obtain a political connection, they aim to access
and acquire the government resources, such as financial subsidies and
free land, at a low cost, while do not pay attention to the investment in
the original CE strategy (Kornai et al., 2003; Sheng et al., 2011).
Based on the above arguments, this study proposes the following
hypotheses:
H1: Political connection positively impacts CE strategy.
H1a: Compared with non-SOEs, the impact of political connection on
promoting CE strategies in SOEs is more significant.
H1b: The higher the political connection level is, the more significant
impact are SOEs’ CE strategies.
2.2. CE strategies and green innovation
CE strategies may be a positive factor for green innovation. Entre­
preneurship refers to new and established companies’ active search for
new businesses and new products, and is not solely restricted to new
investments (Harms et al., 2010). To be specific, enterprises with a CE
strategy focus on the changes in the market and promote developing the
C. Zhang et al. Journal of Business Research 146 (2022) 375–384

Independent variable Mediating variable Dependent variable

Political Green
CE strategy
connection innovation
Fig. 1. The variables and mediating mechanism.

ability to forecast future market trends (Dess & Lumpkin 2005). A CE

Table 1
strategy implies the development of innovation behavior and avoidance
The main variables in this study.
of established solutions and methods (Kyrgidou & Spyropoulou, 2013).
Following the above implications, Bouncken et al. (2016) found a pos­ Variables Variable meanings
itive relationship between CE strategies and innovation, supported by a GInno Green innovation
survey of 171 production companies. PConn Political connection
During the innovation process, risk-taking is necessary for enter­
prises because innovation is always accompanied by high risk (Wales
et al., 2013). One obstacle to innovation is a lack of support for enter­ PConnTown Political connection at
prises, which can be improved internally within enterprises (Božić & township level
Rajh, 2016). In this regard, SOEs have an advantage over non-SOEs
PConnCounty Political connection at
because of their natural political connections, and SOEs are often
county level
required to pay for government’s social expenses by bearing the cost of PConnPref Political connection at
certain social or political objectives (Zhang et al., 2016; Zhu et al., prefecture level
2016). As they are appointed by the government, Chinese SOE execu­
PConnProv Political connection at
tives have little concern regarding risk-taking (Boubakri et al., 2013;
province level
Ding et al., 2015). Hence, SOEs are capable in terms of risk-taking ability
and promoting green innovation behavior, as induced by a CE strategy. CE CE strategy
Non-SOEs are more typical risk-averse enterprises. Executives of
non-SOE enterprises are inclined to be concerned regarding the risks and
potential failures of innovation, as such failure could affect their
RD Investment intensity in
governance of enterprises (Gomez-Mejia & Wiseman, 2007). Owing to R&D
the lower return rate from green innovation (compared with other in­ Brand Investment intensity in
novations), CE strategies in non-SOEs may invest less capital into green brand equity
innovation. Org Investment intensity in
organizational capita
According to the above arguments, this study proposes that the Hm Investment intensity in
following hypothesis: human capital
H2: Compared with non-SOEs, the promotional impact of a CE
strategy on green innovation in SOEs is more significant. Sources: The authors drew this table.
Calculation methods
Number of green patent authorizations
A dummy variable that equals 1 if the
enterprise’s chairman or CEO serves as
a current or former officer of the
government or the military
A dummy variable that equals 1 if the
chairman or CEO serves at township
level
A dummy variable that equals 1 if the
chairman or CEO serves at county level
A dummy variable that equals 1 if the
chairman or CEO serves at prefecture
level
A dummy variable that equals 1 if the
chairman or CEO serves at province
level
Sum of the four subcategories of CE
strategy, including investment intensity
in R&D, brand equity, organizational
capital and human capital
Ratio of an enterprise’s R&D
expenditure on sales revenue
Ratio of an enterprise’s branding
expenditure on sales revenue
Ratio of an enterprise’s organization
expense on sales revenue
Ratio of 10% of the enterprise’s
administration expense on sales
revenue

2.3. The roles of the four subcategories of CE strategies
A CE strategy endeavors to gain comparative advantages and supe­
rior performance by investing in intangible assets, namely, the valuable,
rare, inimitable, and nonsubstitutable assets in enterprises (Pitelis &
Teece, 2010; Barney, 2011). Referencing this perspective, and that of He
et al. (2020), this study argues that a CE strategy contains four sub­
categories: investing in R&D, brand equity, organizational capital and
human capital.
To be specific, R&D enhances corporate ability to develop new
products, services, and other novel features. As such, enterprises are able
to become pioneers in a field before their competitors (Ettlie, 1998). In
SOEs, the likelihood of promotion to an upper-level position motivates
executives with political connections to promote R&D activities through
allocating additional investment in R&D (Su et al., 2019; Cheng et al.,
2019). This generates superior green innovation performance outcomes
(Xu et al., 2020).
Positive brand equity is also an essential factor for building a
communication channel with customers. Therefore, customers are
willing to pay a high price for the products, establishing competitive
advantage (Wang & Sengupta, 2016). Executives with political con­
nections may be optimistic about investing in branding. In addition,
governments can provide official endorsements for enterprises,
benefiting brand equity. Executives with political connections can
leverage their ties with the government to seek such an endorsement,
promoting investment in their brand equity. This can easily be achieved
by SOEs because SOEs have close ties with government. In terms of the
growing importance of green ethics in corporate brand equity, branding
efforts may also help strengthen green innovation efforts.
As current or former government bureaucrats, executives with po­
litical connections are familiar with organizational systems. They may
assume that they can depend on organizational systems when managing
either threats or opportunities. Investing in organizational capital may
be the outcome of political connections, especially in SOEs, because
their organizational systems are similar to those of the government.
Organizational capabilities have been demonstrated to be a determinant
of corporate green innovation (Aboelmaged & Hashem, 2019).
Investing in human capital can aid enterprises’ green human
resource management and further enhance their green innovation
ability (Song et al., 2021). Conversely, political connections may not be
conducive to investing in human capital. The promotional incentive
induced by political connections, particularly for SOEs, has been shown
to enhance the number of firm employees because SOE executives are
held responsible for current social employment problems; however, this
brings no benefit in terms of human capital investment (Kong et al.,
2018).
According to the above arguments, this study proposes that the
following hypotheses:
H3a: In SOEs, political connections benefit the investment in R&D
and promote green innovation.
H3b: In SOEs, political connections benefit the investment in brand
equity and promote green innovation.
H3c: In SOEs, political connections benefit the investment in orga­
nizational capital and promote green innovation.
H3d: In SOEs, political connections reduce the investment in human
capital and diminish green innovation.

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C. Zhang et al. Journal of Business Research 146 (2022) 375–384

Table 2
Descriptive statistics.
Variables Full sample SOEs Non-SOEs

Mean S.D. Min Max Mean S.D. Min Max Mean S.D. Min Max

GInno 0.680 3.300 0 92 1.134 4.553 0 92 0.388 2.076 0 65

PConn 0.349 0.477 0 1 0.262 0.440 0 1 0.405 0.491 0 1
PConnTown 0.025 0.158 0 1 0.020 0.140 0 1 0.029 0.168 0 1
PConnCounty 0.060 0.238 0 1 0.047 0.211 0 1 0.069 0.253 0 1
PConnPref 0.110 0.313 0 1 0.079 0.270 0 1 0.130 0.336 0 1
PConnProv 0.153 0.360 0 1 0.114 0.318 0 1 0.178 0.382 0 1
CE 0.125 0.099 0.003 1.105 0.111 0.094 0.005 1.105 0.134 0.100 0.003 0.821
RD 0.034 0.031 0 0.526 0.028 0.033 0 0.526 0.037 0.030 0 0.482
Brand 0.064 0.179 0 0.732 0.058 0.267 0 0.732 0.068 0.081 0 0.481
Org 0.032 0.034 0 1.819 0.065 0.069 0 0.736 0.010 0.035 0.001 1.819
Hm 0.024 0.033 0 2.730 0.033 0.039 0 0.395 0.018 0.062 0 2.730
Size 22.047 1.183 18.291 26.582 22.511 1.295 19.241 26.582 21.746 0.995 18.291 25.930
Debt 0.388 0.213 0.007 2.992 0.457 0.211 0.008 1.376 0.343 0.202 0.007 2.992
CFo 0.058 0.074 − 1.080 0.488 0.060 0.074 − 0.704 0.407 0.057 0.074 − 1.080 0.488
Growth 1.103 42.894 − 1.748 3107.432 1.144 28.247 − 1.646 982.662 1.076 50.400 − 1.748 3107.432
Profit − 0.414 20.130 − 680.162 1019.676 − 1.252 16.307 − 569.268 46.391 0.170 22.392 − 680.162 1019.676
Tobin 2.056 1.37 0.699 26.635 1.896 1.194 0.767 11.698 2.162 1.466 0.699 26.635

Source: authors calculated this table with WIND and CSMAR databases.

3. Methodology
3.1. Variables, sample and data sources
Based on the hypotheses developed in Section 2, this study includes
the dependent, independent, mediating and controlled variables. Fig. 1
presents the variables and mediating mechanism.
Table 1 summarizes the main variables in this study. The dependent
variable is green innovation (GInno). This study uses the number of
green patent authorizations as a proxy for green innovation. Detailed
information on enterprises’ green patent authorizations is provided by
the State Intellectual Property Office of China. Authorized patents
related to alternative energy, energy saving, waste management, envi­
ronment management, and renewable power generation represent green
patents (Zhang et al., 2019b).
The independent variable is political connection (PConn), a dummy
variable that equals 1 if the enterprise’s chairman or chief executive
officer (CEO) currently serves or formerly served as an officer of the
government or military (Fan et al., 2007). Additionally, this study in­
troduces a series of independent and dummy variables to measure the
level of political connection. PConnTown is a dummy variable that
equals 1 if the chairman or CEO serves at the township level; PConn­
County equals 1 if the chairman or CEO serves at the county level;
PConnPref equals 1 if the chairman or CEO serves at the prefecture level;
and PConnProv equals 1 if the chairman or CEO serves at the province
level. No political connection exists at center level in this study sample.
All information with regard to chairmen and CEOs’ political connections
was collected and analyzed based on the WIND database.
The mediating variable is CE strategy (CE), which is calculated as the
sum of the four subcategories of CE strategy, including investment in­
tensity in R&D, brand equity, organizational capital and human capital
(He et al., 2020). To be specific, investment intensity in R&D (RD) is
calculated as the ratio of an enterprise’s R&D expenditure to sales rev­
enue. Investment intensity in brand equity (Brand) is the ratio of an
enterprise’s branding expenditure to sales revenue, and branding
expenditure is calculated as 60% of advertising expenditure (He et al.,
2020). Investment intensity in organizational capital (Org) is the ratio of
10% of the enterprise’s administration expense to sales revenue. Ac­
cording to De and Dutta (2007), in reality, a small proportion of
administration expense is used to invest in organizational capital. This
study selected 10% as this small proportion, as did He et al. (2020).
Investment intensity in human capital (Hm) is the ratio of 10% of the
enterprise’s administration expense to sales revenue. Salary is widely
used to measure human capital.
The controlled variables (Control) include enterprise size (Size), debt
ratio (Debt), cash flow (CFo), enterprise growth (Growth), profit per­
formance (Profit), and Tobin’s q (Tobin). Enterprise size is a factor that
influences enterprises’ strategies and performance (Rogers, 2004), and
is measured by the natural logarithm of total assets. Debt ratio, cash
flow, and Tobin’s q represent an enterprise’s refinancing ability and risk,
and these factors influence strategy and innovation investment (Gebauer
et al., 2018; Abel, 2018). This study measures debt ratio using debt-to-
asset ratio and calculates cash flow using the ratio of net cash flow
from operating activities to total assets. The method used to calculate
Tobin’s q is based on Tobin (1969). Enterprise growth is measured using
the growth rate of operating revenue in the current period; profit per­
formance is calculated using the growth rate of net profit in the current
period. These two factors are examined as they influence entrepre­
neurship intention and enterprises’ strategies and innovation, are
examined (Getz & Petersen, 2005).
The sample in this study includes pollution-intensive enterprises
listed on the Chinese Shanghai and Shenzhen Stock Exchange during the
period 2011–2019. This study determines pollution-intensive enter­
prises based on the sector to which the enterprise belongs. The Ministry
of Environmental Protection in China defined 16 sectors as pollution-
intensive. These include the thermal power, steel, cement, electrolytic
aluminum, coal, metallurgy, chemical, petrochemical, building mate­
rials, paper-making, brewing, pharmaceutical, fermentation, textile,
tanning, and mining industries. The specific industry to which enter­
prises belong can be found in the WIND database. This study also ex­
cludes the listed enterprises that are listed on the ST/*ST stock
exchange.
All data related to mediating and control variables and state- and
nonstate-owned status were gathered from WIND and China Stock
Market Accounting Research (CSMAR) databases.
3.2. Empirical models
This study adopted several models to test the hypotheses formulated
in Section 2.
The model to test H1 and H1a is presented in Formula (1) as follows:
CEit = α0 + α1 PConnit + α2 Controlit + εit (1)
where α represents coefficients; ε denotes a mean zero random error
term; and i and t denote firm and year, respectively. H1 can be proved if
α1 is significantly positive when the model is adopted in the whole
sample; H1b can be proved if α1 is significantly positive when the model
is adopted in the SOE sample and is higher than that when adopted in the

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C. Zhang et al. Journal of Business Research 146 (2022) 375–384

Table 3
Correlation analysis.
Variables GInno PConn CE RD Brand Org Hm Size Debt CFo Growth Profit Tobin

GInno 1
PConn − 0.025 1
CE − 0.097 0.050 1
RD − 0.043 0.052 1
Brand − 0.087 0.033 0.261 1
Org − 0.100 0.037 0.492 0.292 1
Hm − 0.049 − 0.031 0.131 0.167 0.389 1
Size 0.233 − 0.080 − 0.219 − 0.221 − 0.130 − 0.336 − 0.138 1
Debt 0.108 − 0.111 − 0.314 − 0.249 − 0.242 − 0.230 − 0.104 0.407 1
CFo 0.040 − 0.020 0.076 0.018 0.080 − 0.086 0.059 0.097 − 0.167 1
Growth − 0.004 − 0.011 − 0.013 − 0.014 − 0.008 − 0.013 − 0.006 0.021 0.024 − 0.006 1
Profit − 0.002 − 0.016 0.019 0.002 0.022 − 0.044 0.002 0.010 − 0.075 0.071 0.012 1
Tobin − 0.093 − 0.011 0.293 0.220 0.209 0.305 0.185 − 0.335 − 0.270 0.146 − 0.012 − 0.021 1

Source: authors calculated this table with WIND and CSMAR databases.

non-SOE sample. The model to test H1b is developed based on Formula
(1), replacing the PConn with PConnTown, PConnCounty, PConnPref, and
PConnProv.
As for H2, Formula (2) was set in following model, based on the
mediating effect model (Yang et al., 2021):
GInnoi,t+1 = β0 + β1 PConnit + β2 CEit + β3 Controlit + εit
where β represents coefficients. The H2 can be proved if β2 is
significantly positive when the model is adopted in the SOE sample and
is higher than that when adopted in the non-SOE sample. This study
forwarded the dependent variable by one year in Formula (2) because
patent generation requires time. The one-year forward can also avoid
simultaneity and address reverse causality in the model (Rong et al.,
2017).
This study further developed Formulas (1) and (2), replacing the CE
with RD, Brand, Org, and Hm to test H3a, H3b, H3c, and H3d, respec­
tively. Taking RD as an example, the models were developed as the
following Formulas (3) and (4).
RDit = γ 0 + γ 1 PConnit + γ2 Controlit + εit
GInnoi,t+1 = θ0 + θ1 PConnit + θ2 RDit + θ3 Controlit + εit
where γ and θ represent coefficients. H3a can be proved if, and only
if, both γ 1 and θ2 are significantly positive when the model is adopted in
the SOE sample.
SOEs and 40.5% of non-SOEs, had political connections. Among politi­
cally connected enterprises, province-level connection is the highest, as
the mean of PConnProv is the highest among the political connection
level variables. The mean and maximum of CE in the full sample were
0.125 and 1.105, respectively. This finding indicates that the average
and maximum ratios of CE strategy investment to total revenue in Chi­
(2)
nese pollution-intensive enterprises during the sample period were
12.5% and 110.5%, respectively. There was no notable difference be­
tween SOEs and non-SOEs in the mean and maximum of CE.
As for the green innovation, the sample enterprises developed a
considerable number of advanced technologies in the environmental
field. Because the mean of GInno was 0.680 in the full sample, this
implied that nearly one green patent was adopted in every enterprise in
each year. One particular enterprise obtained 92 green patent authori­
zations in one year, achieving the most outstanding performance in
terms of green innovation. In addition, the means of the number of green
patent authorizations awarded to SOEs was significantly higher than the
those awarded to non-SOEs. The results suggest SOEs’ superior green
innovation over non-SOEs.
(3)
Table 3 presents the Pearson correlation results of the main vari­
ables. All correlation coefficients were below 0.5, indicating no signifi­
(4)
cant multicollinearity problem for all adopted models.
4.2. Main results

4. Empirical results and discussion
4.1. Descriptive statistics analysis
Table 2 presents the descriptive statistics of the variables used in this
study. As shown in the table, 34.9% of the sample, including 26.2% of
4.2.1. The significant role of CE strategies in SOEs
Table 4 details the main results regarding the relationship between
political connection, CE strategies, and green innovation. The estima­
tions controlled for city and year fixed effects and covered three sam­
ples, including all enterprises, SOEs, and non-SOEs. None of the
coefficients of CE and PConn in Columns (1), (2), (5), and (6) were

Table 4
The significant role of CE strategy in SOEs.
Variables Full sample SOEs Non-SOEs

(1) (2) (3) (4) (5) (6)

CE GInno CE GInno CE GInno

CE 1.616 7.593*** 1.380

(1.631) (3.827) (0.997)
PConn 0.004 − 0.083 0.010* − 0.949*** − 0.001 0.278**
(1.542) (-0.700) (1.704) (-2.789) (-1.045) (2.022)
_cons 0.250*** − 11.278*** 0.318*** − 24.416*** 0.161*** − 2.641*
(7.907) (-6.184) (6.332) (-5.656) (8.544) (-1.684)
City and year fixed effects Yes Yes Yes Yes Yes Yes
Controlled variables Yes Yes Yes Yes Yes Yes
N 5261 4383 2075 1503 3186 2880
A-R2 0.374 0.188 0.421 0.280 0.905 0.117

Notes: t values are shown in brackets; ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.
Sources: The authors developed this table using empirical results based on WIND and CSMAR databases.

379
C. Zhang et al. Journal of Business Research 146 (2022) 375–384

Table 5
Political connection levels and green innovation.
Variables Full sample SOEs Non-SOEs

(1) (2) (3) (4) (5) (6)

CE GInno CE GInno CE GInno

CE − 2.294*** 6.202*** − 0.554

(-3.703) (3.269) (-0.850)
PConnTown − 0.008 0.012 − 0.016 − 0.634 − 0.011 0.033
(-1.231) (0.091) (-1.652) (-1.388) (-1.283) (0.271)
PConnCounty − 0.015 − 0.302 − 0.015 − 1.801 − 0.014 0.095
(-0.663) (-0.735) (-1.120) (-0.040) (-0.058) (0.916)
PConnPref 0.003 − 0.211 0.015 − 0.346 − 0.008 0.077
(0.699) (-1.693) (1.367) (-1.017) (-1.668) (0.772)
PConnProv 0.015 0.086 0.021*** − 0.929* 0.008 0.579**
(3.900) (0.422) (2.644) (-1.911) (1.622) (2.022)
_cons 0.263*** − 11.061*** 0.331*** − 24.141*** 0.195*** − 1.880
(8.325) (-5.969) (6.561) (-5.629) (4.156) (-1.141)
City and year fixed effects Yes Yes Yes Yes Yes Yes
Controlled variables Yes Yes Yes Yes Yes Yes
N 5261 4383 2075 1503 3186 2880
A-R2 0.379 0.189 0.428 0.272 0.416 0.120

Notes: t values are shown in brackets; ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.
Sources: The authors developed this table using empirical results based on WIND and CSMAR databases.

significant, indicating non-existence of a relationship between political innovation in Chinese SOEs.

connection, CE strategy, and green innovation in the full sample and
among the non-SOEs.
In contrast, the coefficient of PConn in Column (3) was 0.010 and
significant, indicating that SOEs with political connections increased the
ratio of CE strategy investment to sales revenue by approximately 1%,
compared with those without political connections. Given that the
average ratio in sample enterprises was 12.5% (as shown in Table 2), the
promotion of political connections on SOEs’ CE strategies was notable.
Column (4) in Table 4 shows the positive and significant coefficient
of CE, revealing that the number of green patent authorizations per year
would increase by approximately 0.759 if the ratio of CE strategy in­
vestment to sales revenue rose by 10% in SOEs. The increase of 0.759 is
higher than the average of the sample enterprises (as shown in Table 2).
The above results suggest that politically connected SOEs added
approximately 0.0761 green patent authorizations per year through CE
strategies, compared with SOEs without political connections. The re­
sults confirm H1a and H2, and conditionally verify H1 only for SOEs.
The results complement Zhang et al. (2019a), illustrating that CE stra­
tegies mediate the significant impact of political connection on green
innovation in SOEs. In reality, Chinese SOEs assume a significant level of
social responsibility. Politically connected SOEs are likely to implement
a CE strategy, improving the capacity for green innovation and even
social responsibility.
4.2.2. Political connection levels and green innovation
Table 5 presents the results regarding different levels of political
connection. Similar to the results in Table 4, all the coefficients of po­
litical connection level variables in Columns (1) and (5) were insignif­
icant. After investigating the different political connection levels,
relationships were still not apparent in the full sample or in non-SOEs.
As for SOEs, the coefficient of PConnProv in Column (3) was 0.021
and significant, implying that province-level SOEs’ political connections
lead to an approximately 2.1% higher ratio of CE strategy investment to
sales revenue. The result confirms the positive effect of high political
connection levels in SOEs.
The coefficient of CE in Column (4) was 6.202 and significant at the
1% level. The result reveals the positive mediating role of CE strategies
between the relationship of political connection level and green
1
This study multiplies the coefficient of PConn in Column (3) by the coeffi­
cient of CE in Column (4), and concludes this figure (Yang et al., 2021).
The results related to political connection levels support H1b and are
consistent with those of previous studies, clearly indicating the positive
impact of a high political connection level on green innovation, partic­
ularly in SOEs (Zhang et al., 2019a; Huang et al., 2021). SOEs’ execu­
tives are employed in the Chinese bureaucratic system; therefore, those
with higher political connection levels are more capable of obtaining
more governmental resources than those with lower levels. This
advantage benefits the resources and administrative power for executing
CE strategies, and further benefits green innovation. Additionally, in
China, after the central government issues a plan to provide resources
for enterprises, province-level government bureaucrats control the
allocation of such resources because of their dominant administrative
power, before lower-level government bureaucrats can gain access;
therefore, province-level political connections are more effective than
others.
4.2.3. The roles of the four subcategories of CE strategies
Table 6 presents the results regarding the roles of the four sub­
categories of CE strategies, namely, investing in R&D, brand equity,
organizational capital, and human capital. Given that the significant
mediating role of CE strategy was shown to only be associated with
SOEs, this subsection emphasizes the influences of the four sub­
categories of CE strategies on SOEs.
As shown in Table 6, the coefficients of PConn in Columns (6) and (8)
were significantly positive, indicating that political connections
increased SOEs’ level of investment in R&D and organizational capital.
Additionally, the coefficients of RD and Org in Column (10) were posi­
tive and at the 5% level, implying that SOEs’ investment in R&D and
organizational capital based on the promotion of political connections
could benefit green innovation. As such, H3a and H3c are confirmed.
The confirmed role of R&D investment complements the conclusions
of Huang et al. (2021), illustrating that political connection promotes
green innovation through additional R&D investment rather than non-
innovation-related patenting. The results also contradict Hu et al.’s
(2017) conclusions that a considerable amount of non-innovation-
related patents in China are motivated by government policy, which
are not apparent in the field of green innovation. This study suggests that
political connections increase patents in the field of green innovation
due to R&D-related entrepreneurship rather than government policy-
motivated patenting.
The confirmed role of organizational capital investment in SOEs is
also reasonable. Executives with experience as government bureaucrats

380
C. Zhang et al. Journal of Business Research 146 (2022) 375–384

may be highly skilled in organizational management; therefore, high

− 13.559*
investment in organizational systems is plausible. Based on Aboelmaged

− 1.035**

(-1.584)
(-1.996)

(-1.823)

− 2.456
(0.675)

(1.256)

(1.988)
11.762

0.287*
and Hashem (2019), organizational systems may improve enterprises’

GInno

0.835

0.119
2880
(15)

Yes
Yes
absorptive capacity, reflecting an enterprise’s ability to absorb, recog­
nize and employ external knowledge. As such, investing in organiza­

(-1.039)
tional capital aids SOEs’ acquisition of green-related external

− 0.001

(1.688)
0.181

0.318
3186
knowledge.
(14)

Yes
Yes
Hm

As for the roles of brand equity and human capital investment, the
results in Columns (7), (9), and (10) do not confirm them. The coeffi­

0.026**
(0.267)

(2.080)
cient of PConn in Column (7) was insignificant, implying that political

0.001

0.199
3186
(13)
Org

Yes
Yes
connection has no impact on brand equity investment. As such, H3b was
unexpectedly rejected. Baumann and Kritikos (2016) also provided an

0.043***
explanation for rejecting H3b, namely, executives bear the risk when
(0.198)

(4.190)
Brand

0.001

0.101
enterprises fail to realize a positive return on their brand equity in­

3186
(12)

Yes
Yes
vestment. In the case of this study, because politically connected exec­
utives in SOEs strive for superior performance to advance the likelihood
Non-SOEs

0.086***

of promotion to upper-level positions (Li & Zhou, 2005; Yu et al., 2016),

(0.211)

(6.290)
0.001

0.361
3186 the assumption of a negative impact of political connection on brand
(11)

Yes
Yes
RD

equity investment is reasonable. In addition, the significantly negative

coefficient of Brand in Column (10) indicates that Chinese SOEs in
− 26.041***
− 16.594***

− 0.992***

particular put less effort in green branding when investing in brand

56.943**
(-5.102)

(-1.050)

(-2.820)

(-6.115)
6.418**

− 8.182
(2.512)

(2.128)

equity.
GInno

0.282
1503
(10)

Yes
Yes

The coefficient of PConn in Column (9) was significant and negative,

indicating that politically connected executives in SOEs invested less in
human capital. However, in terms of the insignificant coefficient of Hm
− 0.002*
(-1.651)

(1.893)
0.092*

0.723

in Column (10), H3d is also rejected. The human capital-related results

2075
Yes
Yes
Hm
(9)

support two previous studies. Kong et al. (2018) found that politically
connected executives in SOEs put less effort into human capital invest­
0.001***

0.029***
(10.165)

Notes: t values are shown in brackets; ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.

ment, whereas Cuerva et al. (2014) found that human capital did not
(2.854)

0.477
2075

foster green innovation in Spanish food and beverage firms, which are
Org

Yes
Yes
(8)

also pollution-intensive sectors.

Regarding the results of the full sample and non-SOEs, the co­
0.046***
(0.329)

(4.402)

efficients of the variables in Columns (1), (2), (3), and (4) show similar
Brand

0.001

0.133
2075

results in the full sample compared to those of SOEs, expect for the
Yes
Yes
(7)

insignificant coefficient of Org in Column (5). In contrast, none of the

Sources: The authors developed this table using empirical results based on WIND and CSMAR databases.

four subcategories of CE strategy were found to have significant roles for

0.078***
0.006**
(2.203)

(3.945)

non-SOEs in terms of the coefficients of interested variables in Columns

0.295
2075
SOEs

Yes
Yes
(6)
RD

(11), (12), (13), (14), and (15). The results of the full sample and non-
SOEs underline the necessity for ownership-related subsample re­
gressions in such investigations.
− 11.679***
− 3.499***

The findings for non-SOEs suggest that there is no incentive impact of

(-4.979)

(-0.732)

(-0.680)

(-6.359)
2.789**

− 6.312

− 0.085
(2.111)

(0.271)
GInno

1.364

0.189
4383

the ties with government on R&D, branding, organizing, or human

Yes
Yes
(5)

capital. Perhaps the ties are weaker than those of SOEs or executives in
non-SOEs have leveraged such ties to acquire resources provided by the
− 0.003**

government at a low cost, rather than developing CE strategies (Kornai

(-2.432)
0.152**
(2.520)

0.209
5261

et al., 2003; Sheng et al., 2011).

Yes
Yes
Hm
(4)

4.3. Robustness check

0.001**

0.023**
(1.770)

(1.990)

0.181
5261
Org

Yes
Yes
(3)

This study further tested the following possible errors that might
induce biased estimation in regressions to conduct robustness checks:
(1) sample selection bias and (2) variable measurement error.
0.104***
(1.002)

(4.439)
The roles of four subcategories of CE strategy.

Brand

0.004

0.320
5261
Yes
Yes
(2)

4.3.1. Sample selection bias

This study tested and addressed the sample selection bias from two
Full sample

0.003***

0.096***

perspectives. One is the possible significant gap in green innovation

(2.567)

(9.263)

0.280
5261

between politically connected and non-connected enterprises, adopting

Yes
Yes
(1)
RD

the propensity score matching (PSM) method to exclude the sample

enterprises that induced the gap (Zhou et al., 2019). The PSM method
City and year fixed effects

can also address possible reverse causality in the study models. To be

specific, this study used the nearest neighbor matching approach and
Controlled variables

controlled variables to calculate the propensity scores of politically

connected and non-connected enterprises and then excluded the sample
Variables

enterprises that induced the gap, based on the propensity scores.

Table 6

PConn
Brand

The other perspective considered the outliers embedded in the ob­

_cons

A-R2
Org

Hm
RD

servations. After summarizing the characteristics of variables, this study

381
C. Zhang et al. Journal of Business Research 146 (2022) 375–384

Table 7
Robustness check results after reselecting sample.
PSM Winsorize

Full sample SOEs Non-SOEs Full sample SOEs Non-SOEs

Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
CE GInno CE GInno CE GInno CE GInno CE GInno CE GInno

CE − 1.640** 8.387*** 1.981 1.367 4.935** − 0.833*

(-2.503) (4.422) (1.205) (1.612) (2.267) (-1.823)
PConn 0.003 − 0.040 0.007** − 0.946*** − 0.001 0.299** 0.002 − 0.022 0.005** − 0.112 − 0.001 − 0.017
(1.098) (-0.344) (2.010) (-2.671) (-1.030) (2.154) (1.209) (-0.538) (2.102) (-0.602) (-1.163) (-0.445)
_cons 0.213*** − 8.932*** 0.123*** − 26.204*** 0.174*** − 2.169 0.181*** − 10.326*** 0.167*** − 19.505*** 0.159*** − 2.010***
(6.240) (-4.978) (4.016) (-5.835) (9.289) (-1.160) (9.232) (-8.404) (8.111) (-6.571) (9.047) (-3.545)
City and Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
year
fixed
effects
Controlled Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
variables
N 5240 4382 2065 1501 3171 2572 5158 4255 2035 1457 3121 2494
A-R2 0.383 0.168 0.859 0.309 0.910 0.111 0.519 0.290 0.896 0.425 0.925 0.196

Notes: t values are shown in brackets; ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.
Sources: The authors developed this table using empirical results based on WIND and CSMAR databases.

Table 8
Robustness check results after remeasuring variables.
New CE New GInno

Full sample SOEs Non-SOEs Full sample SOEs Non-SOEs

Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
CE GInno CE GInno CE GInno CE GInno CE GInno CE GInno

CE 1.616 10.213*** − 0.120 − 3.445 1.602* − 6.195

(1.627) (4.111) (-0.127) (-1.228) (1.912) (-1.512)
PConn 0.001 − 0.083 0.006** − 0.957*** 0.001 0.296** 0.004 − 0.017 0.010* − 0.041 − 0.001 − 0.043
(0.633) (-0.688) (2.199) (-2.804) (0.205) (2.143) (1.542) (-0.110) (1.704) (-0.231) (-1.045) (-0.193)
_cons 0.159*** − 11.822*** 0.078*** − 25.069*** 0.086*** − 2.567 0.250*** − 16.593*** 0.318*** − 15.817*** 0.161*** − 13.125***
(11.782) (-6.377) (3.952) (-5.982) (6.291) (-1.516) (7.907) (-9.955) (6.332) (-4.964) (8.544) (-4.894)
City and year Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
fixed effects
Controlled Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
variables
N 5261 4383 2075 1503 3186 2880 5261 4383 2075 1503 3186 2880
A-R2 0.886 0.189 0.894 0.281 0.937 0.118 0.374 0.270 0.421 0.357 0.905 0.236

Notes: t values are shown in brackets; ***, **, and * indicate statistical significance at 1%, 5%, and 10% levels, respectively.
Sources: The authors developed this table using empirical results based on WIND and CSMAR databases.

winsorized CE and GInno at the 1st and 99th percentiles, re-estimating
the models after the two robustness checks.
Table 7 presents the robustness check results after reselecting sam­
ples from the two perspectives. The coefficients of the variables of in­
terest remained positive and significant, and significant results were
only found for the SOE sample. This check ensures that the main results
in this study are not sensitive to sample selection bias, and thereby
confirming the robustness of the conclusions.
4.3.2. Variable measurement error
This study also tested potential variable measurement errors from
two perspectives. One is the measurement of CE. Erickson and Jacobson
(1992) argued that investing in R&D and brand equity determines an
enterprise’s entrepreneurship orientation. As such, this study recalcu­
lated CE by the sum of investing intensity in R&D and brand equity. The
other perspective is the measurement of GInno. This study replaced the
number of green patent authorizations with a dummy variable that
equaled 1 if the enterprise had at least one green patent authorization
and 0 otherwise. This action avoids potential errors in calculating green
patent authorizations. This study re-estimated the models after the two
robustness checks.
Table 8 presents the robustness check results after re-measuring
variables from the two perspectives. The coefficients of the variables
of interest remained positive and significant, and again, the significant
results were only found for the SOE sample. This check ensures that the
main results in this study are not sensitive to variable measurement
error, thereby confirming the robustness of the conclusions.
5. Conclusions and implications
5.1. Conclusions
This study argues that CE strategies could have an unidentified
mediating role between political connection and green innovation. A CE
strategy includes investing in R&D, brand equity, organizational capital,
and human capital. Based on hypotheses related to the mediating role of
CE strategy, this study investigates Chinese pollution-intensive com­
panies listed during the period 2011–2019.
The empirical results demonstrate that only SOEs’ political connec­
tions significantly promote green innovation through raising the in­
vestment in CE strategy. Politically connected SOEs added
approximately 0.076 green patent authorizations per year through CE
strategies. The results in SOEs were confirmed to be robust after a bat­
tery of checks.
Further investigations support the positive impact of high levels of
political connection, revealing that only the SOEs with province-level
political connections raise investment in CE strategies, benefiting
green innovation. Additionally, of the four subcategories of CE strategy

382
C. Zhang et al.
investments, political connection mainly increases SOEs’ investment in
R&D and organizational capital, thereby benefiting green innovation.
However, the positive roles of investing in brand equity and human
capital were not verified.
5.2. Implications
Based on the conclusions, this study recommends that governments
maximize the entrepreneurship investment effects of political connec­
tions to encourage SOEs’ green innovation. To be specific, policymakers
could appoint more government bureaucrats at high layers as executives
of SOEs. Additionally, policymakers should also issue some targeted
guidelines and subsidies to educate and encourage SOEs’ executives to
invest in R&D and organizational capital.
This study does have some limitations. For instance, this study does
not cover the possible heterogeneous roles of CE strategies among
different cities, enterprise scales, or executive characteristics. Further­
more, this study does not examine the possible interaction effects of CE
strategy and environmental regulation. Future papers could expand on
these two perspectives.
CRediT authorship contribution statement
Cheng Zhang: Supervision, Funding acquisition, Conceptualization.
Bo Zhou: Writing – original draft, Methodology, Investigation, Data
curation. Xuan Tian: Supervision.
Declaration of Competing Interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
Data availability
The authors are unable or have chosen not to specify which data has
been used.
Acknowledgments
This work was supported by the National Social Science Foundation
of China [grant number 21ZDA021].
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Cheng Zhang, Ph.D., graduated from Renmin University of China. He is a Professor and
the Dean of the School of Finance, Nanjing University of Finance and Economics. His
research interests include energy and environmental economics and management, in­
dustrial economics, and green finance. He has published more than 30 papers in peer-
reviewed journals, including some SCI/SSCI journals, such as Journal of Business
Research, Energy Policy, Applied Energy, and Economic Modeling.
Bo Zhou works for the School of Finance, Nanjing University of Finance and Economics.
His primary research area concentrates on environmental and economic impacts of pol­
icies, and corporate green investment. On these topics, he has published articles on some
peer-reviewed journals such as China Economic Review, Renewable and Sustainable En­
ergy Reviews, and Energy Policy.
Xuan Tian is a graduate student at the School of Economics, Nanjing University of Finance
and Economics. Her research interests are population, resource and environmental
economics.