Do cognitive orientations foster corporate innovation? Evidence from managerial guanxi-cognition

We examine the impact of managerial guanxi-cognition (Ln_MGC) on corporate innovation. By constructing a novel firm-level Ln_MGC indicator using textual analysis of the MD&A sections of annual reports, we capture managers’ cognitive capacity in navigating social and relational networks. We find that firms with higher levels of managerial guanxi-cognition exhibit significantly greater innovation output and efficiency. The transmission mechanism reveals that managerial guanxi-cognition promotes innovation by enhancing information advantages and strengthening resource assurance. Moreover, the positive relationship between managerial guanxi-cognition and innovation is more pronounced in firms with lower visibility, higher operational risk, and greater capacity to absorb and utilize external knowledge. Further analyses show that managers’ external and business guanxi-cognition has a stronger innovation-enhancing effect than their internal and political guanxi-cognition, and that managerial guanxi-cognition more effectively promotes breakthrough rather than incremental innovation. From a value-creation perspective, we show that managerial guanxi-cognition ultimately enhances future firm value by improving corporate innovation performance. Overall, this study contributes to the literature on managerial cognition and corporate innovation by highlighting how managers’ understanding and leveraging of social ties shape firms’ strategic innovation outcomes.