Social Ties and Favoritism in Chinese Science

Abstract

We are grateful for comments and suggestions from Jesse Shapiro and six anonymous referees.We would also like to thank Hardy provide very able RA work. ABSTRACTWe study favoritism via hometown ties, a common source of favor exchange in China, in fellow selection of the Chinese Academies of Sciences and Engineering. Hometown ties to fellow selection committee members increase candidates' election probability by 39 percent, coming entirely from the selection stage involving an in-person meeting. Elected hometown-connected candidates are half as likely to have a high-impact publication as elected fellows without connections. CAS/CAE membership increases the probability of university leadership appointments and is associated with a US$9.5 million increase in annual funding for fellows' institutions, indicating that hometown favoritism has potentially large effects on resource allocation.

CEO hometown ties and tax avoidance‐evidence from China's listed firms

“…Moreover, political connections may distort resource allocation in favour of connected firms through preferential lending (Mian and Khwaja, ; Wu et al ., ; Chan et al ., ; Cull et al ., ), government bailout (Faccio, ), legal protections (Li et al ., ) and government contracts (Goldman et al ., ). The consequences of rent‐seeking and the resultant distortion of resource allocation in favour of politically connected firms have long been a concern for economists (Fisman et al ., ). Prior literature has studied the factors that impact corporate tax avoidance and association between political connections and corporate tax avoidance (Kim and Zhang, ; Lin et al ., ).…”

“…Hometown ties are believed to be the most widespread source of networks in Chinese society (Fisman et al ., ). Due to the essential role that hometown ties play in China, in this paper, we employ hometown ties between CEOs and local government officials as a new measure of corporate political connection and study how hometown ties affect firms’ tax avoidance activities.…”

“…The effect of hometown ties between CEO and local government officials on tax avoidance deserves particular attention because of the essential role that hometown ties play in ‘guanxi’, the culture of favour exchange in Chinese society (Fisman et al ., ). Networks of interpersonal obligations or ‘guanxi’ are a historically and culturally essential part of business in China (Gold and Guthrie, ).…”

“…Developing political networks is a normal part of doing business there. Hometown tie networks have deep and important roots in Chinese culture and play a central role in political, economic and social life in the culture of favour‐exchange (Fisman et al ., ). Due to the vast territory and diversified regional environment in China, each region has developed unique culture and traditions.…”

Institutional quality, investment efficiency, and the choice of public–private partnerships

“…The authors determine a distinct feature in which political connections may play a role in obtaining preferential external financing. Since then, there has been increasing support for what has been coined as the ‘political tie’ hypothesis (e.g., Khwaja and Mian, ; ; Faccio et al ., ; Claessens et al ., ; Li et al ., ; Chen et al ., ; Cull et al ., ; Fisman et al ., ). Therefore, given the mixed evidence, it is difficult to gauge whether the different levels of benefits received by firms in PPPs across economies are explained by the law–finance–growth nexus or the political tie hypothesis.…”