The role of managers' political networking and functional experience in new venture performance: Evidence from China's transition economy

Abstract

Drawing upon the resource-based view and transaction cost economics, this study aims to examine how various types of managerial resources (i.e., political networking and functional experience) can be beneficial to new ventures in a transitionIt has long been argued that new ventures experience liabilities from their newness and have a high failure rate, because they often have limited resources and their stable links to clients, supporters, and customers have not yet been established (Stinchcombe, 1965). The literature suggests that top managers play an important role in new venture success (e.g., Eisenhardt and Schoonhoven, 1990;Keeley and Roure, 1990;McGee, Dowling, and Megginson, 1995). Managers can generally offer two types of resources: human capital as indicated by their experience (Eisenhardt and Schoonhoven, 1990;McGee et al., 1995) and social capital as indicated by their external ties (Granovetter, 1985;Shane and Cable, 2002 develop competitive advantage, and to achieve better performance (Barney, 1991).Previous studies in this area are mainly limited to new ventures operating in Western developed markets with relatively stable institutional environments. Yet little is known about how managerial resources are related to new venture performance in transition economies that are experiencing significant institutional changes in moving from central planning to market competition. While several scholars have demonstrated the importance of managerial ties in transition economies (e.g., Peng and Luo, 2000;Xin and Pearce, 1996), this line of research has mainly focused on firms in general rather than specifically examined new ventures. In addition, no study has examined the roles of managerial ties and experience simultaneously. This narrow focus limits theoretical completeness and is a significant gap in the literature. Since the market mechanism (i.e., the allocation of resources mainly by market forces) and the redistributive mechanism (i.e., allocation mainly by governmental agencies) coexist in transition economies (Nee, 1989;Zhou,

Corporate Social Responsibility Reporting in China: Symbol or Substance?

“…Consistent with work on corporate political strategy proposing that firms seek present or future resources from governments, we view political legitimacy, which is associated with greater access to government resources, as a strategic resource for firms (Hillman 2005, Li and Zhang 2007, Peng and Luo 2000, Pfeffer and Salancik 1978. Furthermore, this resource may be especially important in emerging economies where weak formal institutions can lead firms to rely more on informal mechanisms (La Porta et al 1998, Peng andHeath 1996).…”

“…For instance, Peng and Luo (2000) found that managers' interpersonal ties with government officials helped improve their firms' performance. Li and Zhang (2007) also found that new ventures in China rely on government officials to obtain information and funding that contribute to performance. Furthermore, firms with such political connections often have better access to resources critical for growth (Nee 1992).…”

Earnings Management, Politically Connected CEOs, and Politically Connected Independent Board Members: Evidence from China

“…We also study the association between the earnings management behaviors and the presence of politically connected independent board members. Extant literature has established that political connections have a significant impact on firm performance all over the world (Li, Meng, Wang, & Zhou, 2008;Niessen & Ruenzi, 2010;Wu, Wu, Zhou, & Wu, 2012), and this effect is stronger in transition economies (Conyon, He, & Zhou, 2015;Li & Zhang, 2007). China as the largest developing economy entity has attracted a lot of attention in academia, and ISSN 2162-3082 2017 a number of studies have explored the earnings management behaviors of Chinese firms (C. J.…”

It's Not Just a Visit: Receiving Government Officials’ Visits and Firm Performance in China

“…Firms have been found to more actively take non-market actions in emerging economies where market-supporting institutions are less developed (Li & Zhang, 2007 actions and focus on how a specific form of non-market actions would affect firm performance (Shaffer et al, 2000).…”