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Political connections and entrepreneurial investment: Evidence from China's transition economy

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  • Zhou, Wubiao
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    Abstract

    Recent literature in entrepreneurship suggests that market and legal institutions matter for entrepreneurial investment. Yet, prior studies have focused on the role of formal institutions. Building on new institutional theory and political connections literature, this study aims to evaluate the role of political connections in entrepreneurial reinvestment in less developed and transition economies. The purpose of this paper is threefold. First, it aims to demonstrate systematically how political connections affect entrepreneurial reinvestment. Second, it applies this relationship to a subsample group, i.e., Small and Medium Enterprises (SMEs), in order to empirically test whether political connections are more beneficial for large firms or SMEs. Third, it demonstrates that political connections substitute for, rather than complement, formal market and legal institutions. The empirical test uses a nationally representative sample of entrepreneurial firms from China's transition economy.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 28 (2013)
    Issue (Month): 2 ()
    Pages: 299-315

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    Handle: RePEc:eee:jbvent:v:28:y:2013:i:2:p:299-315

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    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: Political connections; Institutions; Entrepreneurial reinvestment rate; China;

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