Guanxi: Connections As Substitutes for Formal Institutional Support

Xin, Katherine; Pearce, Jone L.

doi:10.5465/257072

Cited by 348 publications

(515 citation statements)

References 22 publications

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“…As a relatively new organizational form in China's emerging market, privately controlled firms are vulnerable to various claims and impositions, and are often subject to arbitrary harassment from the government . Executives with political connections, however, may mitigate or even overcome this disadvantage (Xin and Pearce 1996). Therefore: There is some rationale suggesting that achieved political connections might also serve as a buffer from governmental pressure, providing political clout that may allow firms to fend off external claims.…”

Section: Ascribed and Achieved Political Connectionsmentioning

confidence: 99%

“…In these situations, political connections thus serve as a buffer, helping firms protect their interests from rent expropriation (Xin and Pearce 1996).…”

Section: Institutional Contingency Of Political Connectionsmentioning

confidence: 99%

“…The stronger the grabbing hand of the government, the more likely the firm is motivated to cultivate political connections to prevent rent seeking. In places where market institutions are less developed, political connections are likely to be used to protect firm interests (Xin andPearce 1996, Zhou andPoppo 2010), including but not limited to defying rent expropriation. Therefore, Hypothesis 4A (H4A).…”

Section: Resource Dependence and Effects Of Political Connectionsmentioning

confidence: 99%

“…On the other hand, political connections might also bind firms to the government, since political connections may create obligation and higher government expectations (Marquis and Qian 2014) such that firms may feel especially obliged to donate. Privately controlled firms are particularly attuned to building political connections, considering their need for resources, political protection, and legitimacy Luo 2000, Xin andPearce 1996). Furthermore, the underlying incentives driving privately controlled firm donations are very different from those of SOEs, given SOEs' intrinsic duty to take care of social welfare and managerial agency problems (Shleifer and Vishny 1994).…”

Section: Introductionmentioning

confidence: 99%

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Do Political Connections Buffer Firms from or Bind Firms to the Government? A Study of Corporate Charitable Donations of Chinese Firms

Zhang

Marquis

Qiao

2016

Organization Science

306

348

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D o political connections buffer firms from or bind firms to the government? To examine this theoretical puzzle, we distinguish two types of managerial political connections, ascribed and achieved, and theorize that these different types of ties either buffer firms from or bind firms to government demands. Furthermore, we propose that these effects are contingent on both industrial and regional institutional conditions. We test our framework with a unique panel data set of privately controlled listed firms' charitable donations in China from 2001 to 2012. We find that firms whose executives have ascribed bureaucratic connections are more likely to use their connections as a buffer from governmental donation pressure, particularly in competitive industries and less market-oriented regions, whereas in state-monopolized industries this buffering effect is reduced. In contrast, achieved political connections are more likely to serve a binding function that facilitates donation, particularly in state-monopolized industries and more market-oriented regions, but in less marketoriented regions, they buffer firms from the pressure to donate. Our research contributes to the literatures on the effects of political connections, the institutional contingencies of political connections, and the relationship between corporate social responsibility (CSR) and corporate political activities (CPA).Keywords: political connections; corporate charitable donation; resource dependence; institutional environment History: Published online in Articles in Advance September 29, 2016. IntroductionAs institutional linkages that span firms and governmental authorities, firms' political connections are a key component of corporate political strategy in both developed and emerging economies (Hillman 2005, Hillman et al. 1999, Peng and Luo 2000. However, the effects of political connections on firm behavior and outcomes are not clear (Sun et al. 2012). Many studies focus on the benefits from such linkages and indicate that political connections have a "buffering" effect; that is, they provide a buffer for the organization from competitive and regulatory forces via access to information, influence, and legitimacy (Hillman 2005, Hillman et al. 1999, Lester et al. 2008, Peng and Luo 2000. Research has shown that firms can employ their political capital to shield themselves from unwanted political interference, unfavorable regulations, and/or various forms of government rent expropriation (Mellahi et al. 2016). Even in the United States, political connections have been shown to help firms when they deal with regulators (Correia 2014, Yu andYu 2011). In emerging markets, such a buffering effect is seen as an effective mechanism to protect firms from government rent-seeking behavior (Chen et al. 2011, Dieleman andBoddewyn 2012).In contrast, other studies consider these connections from the perspective of the government and emphasize the necessary costs of such linkages for the firm. From this perspective, political connections have a "binding" effect, ...

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Section: Ascribed and Achieved Political Connectionsmentioning

confidence: 99%

“…In these situations, political connections thus serve as a buffer, helping firms protect their interests from rent expropriation (Xin and Pearce 1996).…”

Section: Institutional Contingency Of Political Connectionsmentioning

confidence: 99%

Section: Resource Dependence and Effects Of Political Connectionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Do Political Connections Buffer Firms from or Bind Firms to the Government? A Study of Corporate Charitable Donations of Chinese Firms

Zhang

Marquis

Qiao

2016

Organization Science

306

348

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“…More recent research in China has produced a promising stream of research focusing on mechanisms of guanxi (Luo, Huang, and Wang, 2012), yin/yang (Fang, 2012) and the teachings of Confucius (Shapiro and Li, 2016), which have aimed to challenge established theories of networks, trust-building and change (Chen, Chen and Huang, 2013;Park and Luo, 2001;Xin and Pearce, 1996). Such paradigms may help counter-act the often criticized imperialist tendencies of Anglo-Saxon management research and education (Amdam, 1996).…”

Section: Building New Theories Based On Alternative Paradigms Of Socialmentioning

confidence: 99%

Africa Business Research as a Laboratory for Theory-Building: Extreme Conditions, New Phenomena, and Alternative Paradigms of Social Relationships

2017

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Abstract:Africa is an increasingly important business context, yet we still know very little about it. We review the challenges and opportunities that firms in Africa face and propose that these can serve as the basis for extending current theories and models of the firm. We do so by challenging some of the implicit assumptions and stereotypes on firms in Africa and proposing three avenues for extending theories. One is taking the extreme conditions of some Africa countries and using them as a laboratory for modifying current theories and models of the firm, as we illustrate in the case of institutional theory and the resource-based view. A second one is identifying new themes that arise from analyzing firms in Africa and their contexts of operation, and we discuss four themes: migrating multinationals and the meaning of home country, diaspora networks within and across countries, a recasting of cultural and institutional distance, and new hybrid organizational forms. A third one is developing new theories based on alternative paradigms of social relationships that have emerged in Africa that differ from those underpinning existing theories of the firm, such as kgotla and its view of community-based relationships or ubuntu and its humanizing view of relationships.

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Can CEO's professional connections drive green innovation of SMEs?

Wang,

Huang,

Yuan

2024

Bus Strat Env

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Drawing on social capital theory, we analysis the influence of CEO's professional connections on the green innovation of SMEs. Using data from Chinese manufacturing SMEs, we find that CEO's professional connections can promote green innovation in SMEs. This finding still holds through several endogeneity and robustness tests. We find that this positive relationship is strengthened when the firm faces a more intense industry environment and when the CEO is chairman of the board. By testing the mechanism, we further find that alleviating financing constraints, improving information transparency, and promoting long‐term orientation play a key role in this positive relationship. These findings advance the research process on social capital theory and corporate green innovation and provide important insights into the green innovation practices in SMEs.

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Guanxi: Connections As Substitutes for Formal Institutional Support

Cited by 348 publications

References 22 publications

Do Political Connections Buffer Firms from or Bind Firms to the Government? A Study of Corporate Charitable Donations of Chinese Firms

Do Political Connections Buffer Firms from or Bind Firms to the Government? A Study of Corporate Charitable Donations of Chinese Firms

Africa Business Research as a Laboratory for Theory-Building: Extreme Conditions, New Phenomena, and Alternative Paradigms of Social Relationships

Can CEO's professional connections drive green innovation of SMEs?

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