IDEAS home Printed from https://ideas.repec.org/a/sae/entthe/v44y2020i6p1199-1228.html
   My bibliography  Save this article

Political Connection and Disconnection: Still a Success Factor for Chinese Entrepreneurs

Author

Listed:
  • Ronald S. Burt
  • Sonja Opper

Abstract

Political connection in China is often tested for correlation with business success and government support under a suspicion that connected entrepreneurs enjoy special favors and protection. Research evidence is mixed. In revisiting the debate on political capital in China, we apply a socially embedded perspective on political connection. To this end we introduce two methodological innovations: (a) We develop a broader measure of political connectedness that covers the continuum from political connection to disconnection. (b) We integrate data on political connection with social network data. Specifically, we explore how the social structure around the individual entrepreneur affects performance above and beyond the often tested association between political ties and performance. We draw two conclusions: (1) The success association with political connection is discontinuous. Advantage is less for entrepreneurs weakly connected politically, but significant additional disadvantage arises for the politically disconnected. (2) The additional is that entrepreneurs disconnected from government show no benefit from having an advantaged business network. The politically connected with an advantaged business network show more prosperous business, higher returns on assets, and more likely survival over time. The politically disconnected show none of these benefits. We caution the entrepreneur who plans to ignore the government.

Suggested Citation

  • Ronald S. Burt & Sonja Opper, 2020. "Political Connection and Disconnection: Still a Success Factor for Chinese Entrepreneurs," Entrepreneurship Theory and Practice, , vol. 44(6), pages 1199-1228, November.
    • Handle: RePEc:sae:entthe:v:44:y:2020:i:6:p:1199-1228
    DOI: 10.1177/1042258719893110
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1042258719893110
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1042258719893110?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Xiaowei Rose Luo & Ling Yang & Xiaobin He, 2020. "Can One Stone Kill Two Birds? Political Relationship Building and Partner Acquisition in New Ventures," Entrepreneurship Theory and Practice, , vol. 44(4), pages 817-841, July.
    2. Mara Faccio, 2010. "Differences between Politically Connected and Nonconnected Firms: A Cross‐Country Analysis," Financial Management, Financial Management Association International, vol. 39(3), pages 905-928, September.
    3. Ronald S. Burt, 2019. "Network Disadvantaged Entrepreneurs: Density, Hierarchy, and Success in China and the West," Entrepreneurship Theory and Practice, , vol. 43(1), pages 19-50, January.
    4. Fan, Joseph P.H. & Wong, T.J. & Zhang, Tianyu, 2007. "Politically connected CEOs, corporate governance, and Post-IPO performance of China's newly partially privatized firms," Journal of Financial Economics, Elsevier, vol. 84(2), pages 330-357, May.
    5. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
    6. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    7. Hoang, Ha & Antoncic, Bostjan, 2003. "Network-based research in entrepreneurship: A critical review," Journal of Business Venturing, Elsevier, vol. 18(2), pages 165-187, March.
    8. Burt, Ronald S. & Burzynska, Katarzyna, 2017. "Chinese Entrepreneurs, Social Networks, and Guanxi," Management and Organization Review, Cambridge University Press, vol. 13(2), pages 221-260, June.
    9. Haiyang Li & Yan Zhang, 2007. "The role of managers' political networking and functional experience in new venture performance: Evidence from China's transition economy," Strategic Management Journal, Wiley Blackwell, vol. 28(8), pages 791-804, August.
    10. Zhao, Hongxin & Lu, Jiangyong, 2016. "Contingent value of political capital in bank loan acquisition: Evidence from founder-controlled private enterprises in China," Journal of Business Venturing, Elsevier, vol. 31(2), pages 153-174.
    11. Hongjuan Zhang & Rong Han & Liang Wang & Runhui Lin, 0. "Social capital in China: a systematic literature review," Asian Business & Management, Palgrave Macmillan, vol. 0, pages 1-46.
    12. Bat Batjargal & Michael Hitt & Anne Tsui & Jean-Luc Arregle & Justin Webb & Toyah Miller, 2013. "Institutional Polycentrism, Entrepreneurs' Social Networks, and New Venture Growth," Post-Print hal-02313079, HAL.
    13. Huang,Yasheng, 2008. "Capitalism with Chinese Characteristics," Cambridge Books, Cambridge University Press, number 9780521898102.
    14. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
    15. Jun Du & Alessandra Guariglia & Alexander Newman, 2015. "Do Social Capital Building Strategies Influence the Financing Behavior of Chinese Private Small and Medium–Sized Enterprises?," Entrepreneurship Theory and Practice, , vol. 39(3), pages 601-631, May.
    16. Ge, Jianhua & Stanley, Laura J. & Eddleston, Kimberly & Kellermanns, Franz W., 2017. "Institutional deterioration and entrepreneurial investment: The role of political connections," Journal of Business Venturing, Elsevier, vol. 32(4), pages 405-419.
    17. Hongbin Cai & Hanming Fang & Lixin Colin Xu, 2011. "Eat, Drink, Firms, Government: An Investigation of Corruption from the Entertainment and Travel Costs of Chinese Firms," Journal of Law and Economics, University of Chicago Press, vol. 54(1), pages 55-78.
    18. Burt, Ronald S. & Opper, Sonja, 2017. "Early Network Events in the Later Success of Chinese Entrepreneurs," Management and Organization Review, Cambridge University Press, vol. 13(3), pages 497-537, September.
    19. Nee, Victor & Opper, Sonja, 2012. "Capitalism from Below: Markets and Institutional Change in China," Economics Books, Harvard University Press, number 9780674050204, Spring.
    20. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2006. "Why Do Entrepreneurs Enter Politics? Evidence from China," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 559-578, July.
    21. Bat Batjargal & Michael Hitt & Anne Tsui & Jean-Luc Arregle & Justin Webb & Toyah Miller, 2013. "Institutional Polycentrism, Entrepreneurs' Social Networks, and New Venture Growth," Post-Print hal-02276709, HAL.
    22. Zhao, Chenlin & Burt, Ronald S., 2018. "A Note on Business Survival and Social Network," Management and Organization Review, Cambridge University Press, vol. 14(2), pages 377-394, June.
    23. Zhou, Wubiao, 2009. "Bank Financing in China's Private Sector: The Payoffs of Political Capital," World Development, Elsevier, vol. 37(4), pages 787-799, April.
    24. Chen, Shimin & Sun, Zheng & Tang, Song & Wu, Donghui, 2011. "Government intervention and investment efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 259-271, April.
    25. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
    26. Sheila M. Puffer & Daniel J. McCarthy & Max Boisot, 2010. "Entrepreneurship in Russia and China: The Impact of Formal Institutional Voids," Entrepreneurship Theory and Practice, , vol. 34(3), pages 441-467, May.
    27. Nicholas R. Lardy, 2019. "The State Strikes Back: The End of Economic Reform in China?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 7373, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maia, Rodrigo Gomes Távora & Garcia, Katia Cristina, 2023. "What they say, what they do and how they do it: An evaluation of the energy transition and GHG emissions of electricity companies," Energy Policy, Elsevier, vol. 174(C).
    2. Yunqing Liu & Zekun Dai & Yiting Wu & Fang Da, 2023. "How the Social Relations Affect Performance in Chinese High-tech New Ventures: The Role of Legitimacy Acquisition and Symbolic Strategy," SAGE Open, , vol. 13(4), pages 21582440231, December.
    3. Zhang, Jiamin & Gu, Qian, 2021. "Turning a curse into a blessing: Contingent effects of geographic distance on startup–VC partnership performance," Journal of Business Venturing, Elsevier, vol. 36(4).
    4. Tao Ye & Vincenzo Liu & Xiao Guo, 2023. "Do State Ownership Imprints Affect Innovation in Family Firms? The Estimation and Inference of a Panel Model with a Time Trend," Mathematics, MDPI, vol. 11(17), pages 1-19, August.
    5. Sonja Opper, 2023. "Social network and institution-based strategy research," Asia Pacific Journal of Management, Springer, vol. 40(1), pages 329-351, March.
    6. Jie Gao & Huiying Wu & Jiaxing You & Meg Smith, 2021. "Migrant entrepreneurs and firm innovation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(5), pages 6069-6112, December.
    7. Katharina Scheidgen & Anna Brattström, 2023. "Berlin is Hotter Than Silicon Valley! How Networking Temperature Shapes Entrepreneurs’ Networking Across Social Contexts," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2233-2262, November.
    8. Weizhen Yu & Shuanping Dai & Feng Liu & Yi Yang, 2023. "Matching disruptive innovation paths with entrepreneurial networks: a new perspective on startups’ growth with Chinese evidence," Asian Business & Management, Palgrave Macmillan, vol. 22(3), pages 878-902, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sonja Opper, 2023. "Social network and institution-based strategy research," Asia Pacific Journal of Management, Springer, vol. 40(1), pages 329-351, March.
    2. Zhao, Hongxin & Lu, Jiangyong, 2016. "Contingent value of political capital in bank loan acquisition: Evidence from founder-controlled private enterprises in China," Journal of Business Venturing, Elsevier, vol. 31(2), pages 153-174.
    3. Jianhua Ge & Michael Carney & Franz Kellermanns, 2019. "Who Fills Institutional Voids? Entrepreneurs’ Utilization of Political and Family Ties in Emerging Markets," Entrepreneurship Theory and Practice, , vol. 43(6), pages 1124-1147, November.
    4. Weiqi Dai & Mingqing Liao, 2019. "Entrepreneurial attention to deregulations and reinvestments by private firms: Evidence from China," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1221-1250, December.
    5. Bao, Xiaolu & Johan, Sofia & Kutsuna, Kenji, 2016. "Do political connections matter in accessing capital markets? Evidence from China," Emerging Markets Review, Elsevier, vol. 29(C), pages 24-41.
    6. Dan Li & Li-Qun Wei & Qing Cao & Deqiu Chen, 2022. "Informal institutions, entrepreneurs’ political participation, and venture internationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1062-1090, August.
    7. Cull, Robert & Li, Wei & Sun, Bo & Xu, Lixin Colin, 2015. "Government connections and financial constraints: Evidence from a large representative sample of Chinese firms," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 271-294.
    8. Jun Du & Alessandra Guariglia & Alexander Newman, 2015. "Do Social Capital Building Strategies Influence the Financing Behavior of Chinese Private Small and Medium–Sized Enterprises?," Entrepreneurship Theory and Practice, , vol. 39(3), pages 601-631, May.
    9. Zou, Na & Storz, Cornelia, 2023. "Why do some entrepreneurs thrive? A network content perspective," Journal of Business Research, Elsevier, vol. 161(C).
    10. Zhong-qin Su & Hung-Gay Fung, 2013. "Political Connections and Firm Performance in Chinese Companies," Pacific Economic Review, Wiley Blackwell, vol. 18(3), pages 283-317, August.
    11. Zhang, Yi & Liu, Chun & Wang, Ting, 2020. "Direct or indirect? The impact of political connections on export mode of Chinese private enterprises," China Economic Review, Elsevier, vol. 61(C).
    12. Sihai Li & Huiying Wu & Xianzhong Song, 2017. "Principal–Principal Conflicts and Corporate Philanthropy: Evidence from Chinese Private Firms," Journal of Business Ethics, Springer, vol. 141(3), pages 605-620, March.
    13. Lin, Karen Jingrong & Tan, Jinsong & Zhao, Liming & Karim, Khondkar, 2015. "In the name of charity: Political connections and strategic corporate social responsibility in a transition economy," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 327-346.
    14. Jia, Ning & Mao, Xinshu & Yuan, Rongli, 2019. "Political connections and directors' and officers' liability insurance – Evidence from China," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 353-372.
    15. Jin, Xuejun & Chen, Zhenhao & Luo, Deming, 2019. "Anti-corruption, political connections and corporate responses: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    16. Christopher Marquis & Cuili Qian, 2014. "Corporate Social Responsibility Reporting in China: Symbol or Substance?," Organization Science, INFORMS, vol. 25(1), pages 127-148, February.
    17. He, Lerong & Wan, Hong & Zhou, Xin, 2014. "How are political connections valued in China? Evidence from market reaction to CEO succession," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 141-152.
    18. Feng, Xunan & Johansson, Anders C. & Zhang, Tianyu, 2014. "Political participation and entrepreneurial initial public offerings in China," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 269-285.
    19. Xie, Sujuan & Lin, Bingxuan & Li, Jingjing, 2022. "Political Control, Corporate Governance and Firm Value: The Case of China," Journal of Corporate Finance, Elsevier, vol. 72(C).
    20. Kusnadi, Yuanto & Yang, Zhifeng & Zhou, Yuxiao, 2015. "Institutional development, state ownership, and corporate cash holdings: Evidence from China," Journal of Business Research, Elsevier, vol. 68(2), pages 351-359.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:entthe:v:44:y:2020:i:6:p:1199-1228. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.