Guanxi,political connections and resource acquisition in Chinese publicly listed private sector firms

In this study, we examined the role of guanxi as entrepreneurs’ resource-obtaining mechanism in private sector firms, using a data-set of 184 publicly listed firms in China. We found that guanxi indeed played a positive role that helped private sector firms gain easier access to resources. We also found that guanxi exerted even a greater positive effect on private sector firms’ resource obtaining compared to entrepreneurs’ political participation, due to being the lifeblood of business conduct and social interaction in Chinese culture.     

Threats and opportunities faced by private businesses in China

This article presents a comprehensive analysis of the environment experienced by private businesses in China through examining their relationships with the major stakeholders—namely government, supplier, employee, customer, and competitor.Since the announcement of the economic reform in 1978, substantial political and economic power has been delegated from the central government to the regions. Endowed with this power, local governments have crucial influence on the size of the private sector within their jurisdiction. Being outside the state allocation plan, private firms have less access to raw materials and credit. In the volatile political climate of China, they are vulnerable to attack during political campaigns. Maintaining a cordial relationship with local cadres, through paying bribes and various charges, is thus a prerequisite for survival. Having solicited political backing, a private entrepreneur can not only run his business more smoothly, but also may be more tolerated in his illegal activities such as tax evasion, profiteering, and selling banned products. In short, the whole situation can be described as a collusion of local governments and private businesses at the expense of the central government's interest.Under the economic reform, the distribution system has become less rigid than before. It is easier for private firms to secure supplies, whether raw materials or manufactured goods. Labor input is also not a problem for most private firms which are small in size and employ mainly unskilled workers. However, large private enterprises have to compete with state, collective, and foreign enterprises for managerial staff who are in short supply.There have been marked changes in the consumption pattern since the early 1980s. People spend less on staple foods and more on non-staple foods, consumer goods, and services. Moreover, China is experiencing a consumption boom. Altogether this offers great opportunities to the private sector, which has been expanding its share of industrial output and retail sales very fast. On the other hand, competition is becoming much keener. State enterprises are improving their efficiency and giant multinational corporations are rushing in. As there are few entry barriers, private entrepreneurs are also competing fiercely among themselves.The ideological contradiction of having labor exploitation by private entrepreneurs in a socialist country has prevented the Chinese government from actively encouraging private business. The private sector has been assigned a supplementary role in the dominant public economy. This status has led to discrimination against private firms in obtaining factor inputs, accounting partly for their vulnerability to bureaucratic harassment by local cadres. This will continue to hamper private business development. It is concluded that ideological and political reforms, in addition to the economic reform, are required for providing a more conducive environment for private businesses. The Chinese experience of liberalizing the private sector offers useful insights to governments of other developing countries.     

民营企业政治关联及其效应研究

目前的中国正处于转轨时期,民营企业政治关联普遍存在。本文基于制度理论视角,在评述现有关于政治关联的研究前提下,分析了民营企业政治关联的产生根源和作用机理,认为民营企业政治关联作为一种非正式制度是适应当前制度环境的行为选择,也是通过合法性机制获得企业的经济利益和政治利益,从而促进企业成长。     

Bank finance for private firms in China: Does political capital still pay off?

This paper investigates whether political connection can help private firms in China gain access to commercial bank loans. Based on data from the 2012 Nationwide Survey of Private Enterprises in China, it finds that: (i) politically connected firms were more likely to have access to commercial bank loans; (ii) the mechanism for this better access might be that, on the one hand, political connection was used by private firms as a tool to overcome discrimination and/or information asymmetry in the loan market; on the other hand, political connection was seen by banks as a signal of creditworthiness; and (iii) the importance of political connection seems to lie in the connection to the power to govern rather than the mere opportunity to influence policy.     

民营企业的政治资源与民营企业多元化投资——以中国民营企业500强为例

This paper argues that the political resources owned by Chinese private enterprises affect their diversification strategy under the context of China’s transitional economy. Based on the sample of top 500 private enterprises in 2004 in China, we find the following empirical evidence: First, political resources owned by private enterprises are positively and significantly related to their degree of diversification. Second, the possibility for private enterprises to diversify their business by entering industries under government regulation is positively related to their political resources. Third, the possibility of related diversification for private enterprise is negatively related to its political resources. Translated and revised from Zhongguo Gongye Jingji 中国工业经济 (China Industrial Economy ), 2008, (4): 5–14     

基于模糊集定性比较分析的民营企业政治行为有效性研究

随着我国民营经济的不断发展,民营企业不仅在经济领域内扮演着重要的角色,也在社会政治领域发挥了越来越大的作用。通过构建企业政治行为战略框架,并在此基础上应用定性比较分析法进行多案例研究,探讨民营企业规模、政治战略、政治联系和政治影响力之间的相互匹配关系及对企业政治行为有效性的影响。研究不仅从理论上进一步完善和丰富了企业政治行为理论的内容,而且有着重要的实践意义。     

When Ethics Matters – Interpreting the Ethical Discourse of Small Nature-Based Entrepreneurs

This article examines the unique ethical concerns faced by small nature-based entrepreneurs in their everyday business operations. By using qualitative, empirical data, six kinds of business situations were identified to bring about moral consideration for all the entrepreneurs in this study. The business situations identified were the selection of raw material suppliers, reconciling the quality of production and the lack of resources, the pricing process, the content of marketing information, the close relationships to employees and the collaboration with other entrepreneurs. The ethical argumentation used in these business situations was examined in relation to three ethical theories: utilitarian ethics, deontology and virtue-ethics. This article shows that typical for the decision-making of the small nature-based entrepreneurs in an ethical sense is the variety of ethical arguments used and the important role of customers and employees influencing the ethical views of the entrepreneurs.     

A comparative study of values among Chinese and U.S. entrepreneurs: Pragmatic convergence between contrasting cultures

The People's Republic of China is the world's leading Communist power, yet it also represents the largest potential market for international investment and development. In recent years, China has actively pursued private enterprise development, passing its first Private Company Act in 1988, and subsequently encouraging entrepreneurial activities. More than a half-million new ventures in high-growth manufacturing, engineering, and infrastructural development have been independently established in China in little more than six years, and although it would be presumptuous to assume that China is racing toward a free enterprise economy, there are major changes taking place. From an entrepreneurial perspective, these changes are in sharp contrast to the nation's political ideology, and those who are pursuing new ventures constitute a vanguard of individuals at odds with a majority of society.A critical concern is whether China's entrepreneurs pose a threat to those who are entrenched in a political ideology that, by definition, is opposed to free market economics and private enterprise. As Hofstede (1980) has pointed out, characteristics of a people are defined by their prevailing value systems, and research by Bond (1991), Hofstede (1983a, 1983b), Schwartz (1992), and Triandis et al. (1986) has shown that by systematically studying human values we can gain valuable insights about patterns of behavior, motivation, and expectations of cross-cultural boundaries. Consequently, this study was developed to replicate previous value-related studies among Chinese entrepreneurs and nonentrepreneurial managers. A sample of more than 200 executives of state-owned and privately founded industrial companies provided comparable groups for comprehensive interviews. An analogous sample of U.S. entrepreneurs was selected to represent Western values. This extends several previous studies on private enterprise development in China, but, clearly, the convenient and limited sample cannot be construed as representative of a geographically and ethnically diversified country of more than 1.1 billion people. However, it does provide useful insights to differences and similarities in work-related values between Chinese entrepreneurs, managers, and U.S. entrepreneurs as exploratory research.A primary consideration of this study was to enrich the existing research concerning entrepreneurial values, and in the process, question whether Chinese entrepreneurial values are similar to those held by U.S. entrepreneurs. If so, there would be a stronger case for convergence of value systems and commensurate behavior. Similarities would also support arguments by many that entrepreneurial characteristics, such as individualism, achievement motives, and self-deterministic behavior, are universal. This is complicated, however, by a Confucian social philosophy that places little value on these attributes while underscoring the importance of collective behavior, conformist behavior, and referent group loyalty. It is further complicated by two generations of Communist doctrine that has suppressed individual initiative, commercial achievement, and social mobility. Can entrepreneurial values prevail under such adverse conditions? More specifically, can values associated with individualism and self-determination exist in a society that is collectivist and conformist? Several recent studies on entrepreneurial values suggest that apparent contradictory value sets might co-exist (Baum et al. 1993; Chow and Tsang 1994; Erez and Earley 1993; Hofstede and Bond 1988; Holt, Ralston, and Terpstra 1994). Entrepreneurial research has also questioned the concept of universal values and found that, in many instances, cultural-based values are not necessarily malleable (McGrath et al. 1992), values are often contingent on prevailing cultural antecedents (Shenkar and Von Glinow 1994), and discordant or paradoxical values exist within so-called collectivist societies, among presumed cohesive groups, and within well-defined ethnic clusters (McGrath, MacMillan, and Scheinberg 1992; Ohe, Honjo, and MacMillan 1990; Ralston et al. 1994; Triandis et al. 1988).The current study revealed patterns of value orientations among Chinese entrepreneurs, Chinese executives of state-owned or joint venture firms, and U.S. entrepreneurs that in some instances were substantially different, and in other instances quite similar. Contrasts in these patterns suggest an apparent paradox of entrepreneurship in a collectivist society like China, and in particular, a potential confrontation between Chinese entrepreneurs and nonentrepreneurial managers. The results showed that, indeed, the respondent Chinese managers and entrepreneurs differed sharply on many crucial value dimensions, and although the survey was limited to a southern industrial province, there is the possibility that China may be facing an extremely difficult transition period toward a constrained market economy with overtones of a possible ideological backlash. The results revealed many similarities between the respondent Chinese and U.S. entrepreneurs, but also several important differences steeped in Confucian social philosophy. Although there may be some convergence in values, it is more likely that Chinese entrepreneurs are simply pragmatic, and therefore selective in developing behavior that reflects values associated with achievement, independence, freedom of choice, and self-determination. If these results could be interpreted as prevalent beyond our exploratory sample, then pragmatic expectations may be driving private enterprise development in China more than cultural values, but this is difficult to verify. Whatever implications are drawn from this study must also be taken cautiously because there are indications that definitions of certain values, such as achievement or independence, may have substantially different meanings to American and Chinese entrepreneurs. Care was taken to make translations comparable during the field interviews, but Western concepts inherent in the instruments used for value research may have elicited responses or associated meanings among the Chinese that cannot be accurately interpreted.     

政治关联会影响企业风险承担吗?--来自民营上市公司的经验证据

本文研究了政治关联以及政治关联层级对我国民营上市公司风险承担水平的影响,结果发现：政治关联降低了民营上市公司风险承担水平,且政治关联层级越高,民营上市公司风险承担水平越低。本文的研究深化了对民营企业政治关联所带来的经济后果的认识,同时对加快市场化进程和转变政府职能具有一定的启示意义。     

Women's Managerial Careers in China in a Period of Reform

This contribution examines the opportunities for and barriers to women's managerial careers in China, drawing on first-hand empirical data and existing literature. It focuses on four groups of managers: managerial leaders in government administration, academics in higher education, entrepreneurs in private and self-employed businesses, and rural women managers. The paper explores the Chinese characteristics of gender inequality in management careers against the current political and economic background. It highlights the low level in both quantity and hierarchy of women in management. The contribution argues that women are discouraged managerial candidates for a number of legislative, social and personal reasons.     

The political motivations of ethical consumers

Consumer‐driven labelling schemes such as Fairtrade and the Forest Stewardship Council, are based upon several assumptions of consumer decision making and behaviour. This study aimed to test the validity of some of these assumptions, including the belief that consumers are acting ‘on behalf’ of workers and communities in economically developing countries by supporting fair and ethical trade. It examines the political motivations underlying ethical consumption, such as its relationship to other forms of political activism, reasons behind high purchase frequency and how existing values interact with consumption choices. Drawing upon the results of a series of six focus groups with 58 participants and a nationally representative panel‐based survey of 1014 Australian consumers, this paper argues that many of the factors involved in consumer decision making are inconsistent with the assumptions made by private economic governance schemes in attempting to harness consumer power, calling into question the effectiveness and legitimacy of such schemes. However, by tailoring the marketing strategies to different types of consumers, along with suppliers and retailers, these schemes can potentially increase their effectiveness.     

A marketing perspective on the rise of China: monopoly,politics and value

Abstract

As researchers in the social sciences seek an understanding of the spectacular rise of China, the seemingly counterintuitive stance of an autocratic regime attaining such sustained economic performance challenges multiple analytical frames. The relatively ponderous responses of the United States and Europe to recent global conditions, and the democratic uprisings in Arabic states, further represent a glaring contrast. While the marketing literature is rich in the particulars of specific management issues in the China market, no analysis from the discipline has attempted to provide a broad, distinctly marketing contribution to the China phenomenon. Choice is a fundamental construct underpinning theories of politics, economics and marketing, though it is notably absent from Chinese politics. The changing relationship between markets, business and government reveals a question that is clearly important to marketers, and China is a challenging boundary case for marketing management.     

The Contingent Value of Entrepreneurs’ Political Capital: Evidence from China

ABSTRACT

Who benefit from a transitioning economy, entrepreneurs who are politically connected or disconnected? Market transition theory and power conversion theory offer two divergent answers. Our study seeks to contribute to this debate by examining the contingent value of entrepreneurs’ political capital. We draw from social network theories and investigate whether and how entrepreneurs’ social networks influence the relationship between their political capital and social mobility. Using the data on Chinese entrepreneurs, we find that the impact of political capital on entrepreneurs’ social mobility is contingent on their network centrality. Practical implications and suggestions for future research are also discussed.     

Political risk in private participation projects: The effects of political discretionality and corruption

This article investigates the impact of political risk on the performance of private participation infrastructure projects in emerging markets. Previous studies have shown that firms in regulated sectors are prone to employ political capabilities in their investments overseas. Our analysis of 32,257 projects in 114 emerging countries from 1997 to 2013 shows that higher political discretionality in the host country is negatively associated with project completion. In contrast, a higher level of corruption in the host country is positively associated with project completion. The study makes a contribution to the literature on political risk in foreign direct investments.     

Ethical Leadership and Subordinate Outcomes: The Mediating Role of Organizational Politics and the Moderating Role of Political Skill

This paper posits that ethical leadership increases important organizational and individual outcomes by reducing politics in the workplace. Specifically, we propose that perceptions of organizational politics serve as a mechanism through which ethical leadership affects outcomes. We further argue that the modeled relationships are moderated by political skill. By means of data from 136 matched pairs of supervisors and subordinates employed by a state agency in the southern US, we found support for our predictions. Specifically, we found that perceptions of organizational politics fully mediated the relationship between perceptions of ethical leadership and helping and promotability ratings. In addition, political skill was found to moderate the direct and indirect effects.     

The informal venture capital market: Aspects of scale and market efficiency

Risk capital is a resource essential to the formation and growth of entrepreneurial ventures. In a society that is increasingly dependent upon innovation and entrepreneurship for its economic vitality, the performance of the venture capital markets is a matter of fundamental concern to entrepreneurs, venture investors and to public officials. This article deals with the informal venture capital market, the market in which entrepreneurs raise equity-type financing from private investors, (business angels). The informal venture capital market is virtually invisible and often misunderstood. It is composed of a diverse and diffuse population of individuals of means; many of whom have created their own successful ventures. There are no directories of individual venture investors and no public records of their investment transactions. Consequently, the informal venture capital market poses many unanswered questions.The author discusses two aspects of the informal venture capital market: questions of scale and market efficiency. The discussion draws upon existing research to extract and synthesize data that provide a reasonable basis for inferences about scale and efficiency.Private venture investors tend to be self-made individuals with substantial business and financial experience and with a net worth of $1 million or more. The author estimates that the number of private venture investors in the United States is at least 250,000, of whom about 100,000 are active in any given year. By providing seed capital for ventures that subsequently raise funds from professional venture investors or in the public equity markets and equity financing for privately-held firms that are growing faster than internal cash flow can support, private investors fill gaps in the institutional equity markets.The author estimates that private investors manage a portfolio of venture investments aggregating in the neighborhood of $50 billion, about twice the capital managed by professional venture investors. By participating in smaller transactions, private investors finance over five times as many entrepreneurs as professional venture investors; 20,000 or more firms per year compared to two or three thousand. The typical angel-backed venture raises about $250,000 from three or more private investors.Despite the apparent scale of the informal venture capital market, the author cites evidence that the market is relatively inefficient. It is a market characterized by limited information about investors and investment opportunities. Furthermore, many entrepreneurs and private investors are unfamiliar with the techniques of successful venture financing. The author's scale and efficiency inferences, coupled with evidence documenting gaps between private and social returns from innovation, prompt questions about public as well as private initiatives to enhance the efficiency of the informal venture capital market.The article concludes with a discussion of Venture Capital Network, Inc. (VCN), an experimental effort to enhance the efficiency of the informal venture capital market. VCN's procedures and performance are described, followed by a discussion of the lessons learned during the first two years of the experiment.     

Young People's Attitudes Towards British Political Advertising: Nurturing or Impeding Voter Engagement?

SUMMARY

This article presents findings from a national survey of ‘potential’ first time voters at the 2001 British General Election–specifically their attitudes towards the print advertising used by the main political parties during this election. In analysing the data, the authors were particularly interested in examining the claim that political advertising contributes to a sense of malaise–most acutely apparent among young people. While we found high levels of claimed advertising awareness, this was coupled with largely unfavourable attitudes towards most of the print advertising used in the election. Despite these judgements, most young people considered the advertising to be at least as persuasive as its commercial cousins. Not surprisingly the evidence provides a mixed picture in terms of the role political advertising plays in the political dispositions of young people. As a familiar discourse advertising offers the political classes an entry point to establish a dialogue with young sections of the electorate. However, for many young people, political advertising appears to help reinforce their predilection about politics being something one naturally distrusts.     

VC political connections and IPO earnings management

We examine the effect of VC political connections on accrual and real earnings management (EM) of IPOs controlled by private entrepreneurs in China. We find IPOs backed by government-controlled VCs exhibit severe IPO-year EM, which is driven by those VCs exiting their investments immediately after the VC lock-up expiration. In contrast, IPOs with politically connected private VCs have lower IPO-year EM and are not associated with VC exits. Therefore, IPOs with government-controlled VCs who immediately exit their investments are most likely to engage in ‘window-dressing’ of financial performance, and to have poorer long-run stock performance. The results remain unchanged after a battery of robustness tests.     

An Empirical Investigation of the Relationships between Ethical Beliefs, Ethical Ideology, Political Preference and Need for Closure

An analysis is presented of the relationships between consumers ethical beliefs, ethical ideology, Machiavellianism, political preference and the individual difference variable "need for closure". It is based on a representative survey of 286 Belgian respondents. Standard measurement tools of proven reliability and robustness are used to measure ethical beliefs (consumer ethics scale), ethical ideology (ethical positioning), Machiavellianism (Mach IV scale) and need for closure. The analysis finds the following. First, individuals with a high need for closure tend to have beliefs that are more ethical as regards possible consumer actions, and score higher on idealism and lower on Machiavellianism, than those with a low need for closure. Second, a correlation exists between political preference and ethical beliefs. Third, a significant relationship exists between ethical ideology and political preference for the two largest political parties. Fourth, individuals with a high and low need for closure have different political preferences for right-wing and left-wing parties.     

From business to politics: cross-border CEOs and political leadership in Japan and South Korea

ABSTRACT

Whether or not successful CEOs can make themselves competent political leaders has been a concern within the field of management studies. The fact that capitalist democracy depends largely on a close orchestration between the capitalist class and political leaders has also instigated many studies on the exact nature of such bi-partite relationships between the two groups. The number of the cross-border CEOs who expand their horizons into politics has been on the rise in East Asia, as both historical and contemporary examples indicate. A new trend of the cross-border CEOs invites us to examine historical patterns to confirm how widespread the phenomenon has been since the expansion of capitalist democracies. This study offers a limited historical comparison between Japanese and South Korean cross-border CEOs using an illustrative historical case of Aoki Ichigorô, who mass mobilized the farmers movement against the US military base in Japan and a contemporary case of Ahn Cheol-soo, who unsuccessfully ran for the presidency in 2017. We find that CEOs can be successful as political leaders if they can promote networking leadership styles for both business and politics.