Political connections can be a double-edged sword for innovation in emerging markets. While they provide companies with valuable resources and partnerships, leveraging these benefits requires the right kind of skilled talent, according to a new study from the University of Surrey.

In emerging markets, firms with political connections can gain access to crucial resources and knowledge, potentially driving innovation. However, the presence of highly skilled employees is essential to fully utilize these benefits.

Driving innovation

“Our research suggests that political connections can be a valuable tool for firms in emerging markets to drive innovation. However, having the right talent in place is critical to maximize these benefits,” the researchers explain.

“Simply having political connections isn’t enough. You need the people who can understand and implement the new knowledge and resources effectively. It’s like giving someone a box of expensive tools—they can’t build a house if they don’t know how to use a hammer and saw. Highly skilled employees are the hammers and saws that firms need to turn political connections into real innovation.”

The study examined data from over 3,200 Chinese-listed businesses over a decade. Researchers looked at various factors, including:

• The CEO’s political connections (determined by previous government work experience).
• The business’s level of innovation (measured by the number of invention patent applications).
• The educational backgrounds of employees.

This comprehensive approach allowed Surrey’s researchers to analyze the complex relationship between political connections, talent, and innovation in emerging markets.

The research differentiates between two types of employees: under-qualified and highly skilled. Companies with highly skilled employees can better utilize resources and knowledge from political connections, leading to more innovation.