Managerial ties and product innovation: The moderating roles of macro- and micro-institutional environments

Managerial ties include business ties and political ties, but their individual effects on product innovation remain underexplored in the literature. Integrating social network theory and institution theory, this study first proposes a nonlinear relationship between business/political ties and product innovation and further examines the moderating roles of a macro-institutional environment (comparing developed with underdeveloped regions where firms are located) and a micro-institutional environment (i.e., market dynamism) in the proposed relationships. Empirical findings generally confirmed our hypotheses that 1) business ties have an inverted U-shaped effect on product innovation whereas political ties have a U-shaped effect; 2) if firms operate in developed regions their business ties have a stronger influence on product innovation, whereas if they operate in underdeveloped regions their political ties have a stronger influence; and 3) market dynamism positively moderates the curvilinear relationship between business/political ties and product innovation.