State Ownership and Political Connections

Abstract

The influence of the state on firms in the global economy is alive and well. States have become dominant owners of companies in many countries around the world. Firms have also increasingly established political connections to access resources and improve their competitive positions. Nonetheless, our understanding of how state ownership and political connections affect firm performance remains limited and marked by conflicting findings. Using meta-analytical techniques on a sample of 210 studies spanning 139 countries, we examine two key research questions: (a) How do state ownership and political connections affect firm strategies and financial performance? and (b) How does firm-level strategic decision making mediate the relationships between state ownership, political connections, and firm financial performance? Our findings show that state ownership has a small negative effect on firm financial performance and that political connections have no direct consequences for performance. However, we find evidence that both state ownership and political connections have a profound effect on the strategies firms pursue, such as financial leverage, R&D intensity, and internationalization, and that these strategies play a mediating role in the state ownership–firm performance relationship. We conclude with some suggestions for fruitful future research in further connecting these two important and timely research fields.

Ownership and Corporate Governance across Institutional Contexts

“…Empirical evidence underlines the wide diversity of individual and organizational ownership with respect to the type, such as founder, family, corporate, governmental and institutional (Aguilera, Talaulicar, Chung, Jimenez, & Goel, ; Tihanyi et al, ; Wood & Wright, ), portfolio characteristics of the investor (Bushee, ; Goranova, Dharwadkar, & Brandes, ), activism propensity (Goranova, Abouk, Nystrom, & Soofi, ), or the country of institutional origin (Kavadis & Castañer, ; La Porta, López‐de‐Silanes, Shleifer, & Vishny, ; Zattoni & Judge, ). Furthermore, prior research finds that different types of organizational owners differ in their monitoring effectiveness (Davis & Kim, ; Hoskisson, Hitt, Johnson, & Grossman, ) and in their pursuit of financial versus non‐financial goals (e.g., Gómez‐Mejía, Takacs‐Haynes, Nuñez‐Nickel, Jacobson, & Moyanto‐Fuentes, ).…”

Political ties and performance of multinational corporations in Vietnamese emerging market

“…Government connections are said to offer firms valuable resources, various institutional supports (Wang & Lestari, 2013) and new sources of information and knowledge, which are not easily accessible, to gain a competitive advantage and consequently enhance their performance (Guo, Xu, & Jacobs, 2014;Li & Zhou, 2010;Tihanyi et al, 2019). Moreover, managers often leverage their network relationships to help their firm recognize more business opportunities in the industry (Kotabe, Jiang, & Murray, 2011).…”

Ownership and Corporate Governance across Institutional Contexts

“…Empirical evidence underlines the wide diversity of individual and organizational ownership with respect to the type, such as founder, family, corporate, governmental and institutional (Aguilera, Talaulicar, Chung, Jimenez, & Goel, ; Tihanyi et al, ; Wood & Wright, ), portfolio characteristics of the investor (Bushee, ; Goranova, Dharwadkar, & Brandes, ), activism propensity (Goranova, Abouk, Nystrom, & Soofi, ), or the country of institutional origin (Kavadis & Castañer, ; La Porta, López‐de‐Silanes, Shleifer, & Vishny, ; Zattoni & Judge, ). Furthermore, prior research finds that different types of organizational owners differ in their monitoring effectiveness (Davis & Kim, ; Hoskisson, Hitt, Johnson, & Grossman, ) and in their pursuit of financial versus non‐financial goals (e.g., Gómez‐Mejía, Takacs‐Haynes, Nuñez‐Nickel, Jacobson, & Moyanto‐Fuentes, ).…”