This study examines the mediating effect of institutional capital on the relationship between corporate political activities (CPA) and firm competencies. By adopting an institutional perspective, we identify the influence of a firm’s relational CPA and participation CPA, and its two types of institutional capitals, formal institutional capital (FIC) and informal institutional capital (IIC), on the firm’s competencies. Based on survey data from multi-informants in 303 Chinese firms, our results suggest that firms’ institutional capital (IIC/FIC) partially/fully mediates the relationship between CPA and firm competencies. The findings provide the evidence that how nonmarket strategy, such as corporate political activities, affects a firm’s institutional capital and then its competencies.
International Business Review, Volume 27, Issue 1, Pages 259-268