Can One Stone Kill Two Birds? Political Relationship Building and Partner Acquisition in New Ventures

Luo, Xiaowei; Ling, Yang; He, Xinming

doi:10.1177/1042258719855965

Cited by 32 publications

(58 citation statements)

References 51 publications

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“…This novel finding puts a caveat on the persistent implication from the extant literature that political affiliation is always associated with benefits. We reinforce Luo et al (2019) and Fisman et al (2012) arguments that political relationship building can exert contradictory effects on a new venture's performance. Moreover, our results demonstrate that while state ownership is conducive to firm performance, actual involvement by the government in firm governance may be detrimental (especially to revenues and TPF).…”

Section: Discussion and Concluding Remarkssupporting

confidence: 74%

How much state ownership do hybrid firms need for better performance?

Nguyen

2021

Small Bus Econ

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Hybrid ownership—sharing partial business ownership with the state—is a new form of political connections that entrepreneurs in developing countries may employ to improve their access to key resources. This study investigates hybrid ownership as a strategic decision of entrepreneurs running small businesses in Vietnam—a transition economy. Utilising the resource dependence theory and legitimacy viewpoint, we propose and evidently show that increased state ownership in hybrid firms leads to improved performance. However, increasing state ownership beyond a minority share threshold harms firm performance due to the presence of agency costs. Also, the involvement of the state in firm governance reduces the benefits gained from having state ownership. Plain English Summary Is the more the better? How much state ownership really matters for hybrid firms to enhance their performance? More state ownership means more access to resources and privileges; but too much state ownership may reduce firm efficiency due to its poor governance. Analysing more than one million observations of small businesses in Vietnam, this study offers three insightful implications. First, for academics, institutional conditions should be considered when investigating political connections, especially in an emerging market context. Second, for practitioners, political connections in the form of hybrid ownership when being held at an adequate level can boost firm performance. However, an exceeding level of state ownership in hybrid firms may become harmful. Third, for policymakers, we suggest that forming hybrid business ownership with the private sector helps firms make use of state-owned resources. This collaboration is a win-win solution as long as the state ownership remains at an adequate level.

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Section: Discussion and Concluding Remarkssupporting

confidence: 74%

How much state ownership do hybrid firms need for better performance?

Nguyen

2021

Small Bus Econ

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“…In sum, China’s business environment is designed to channel scarce resources and privileges to the country’s ideologically favored, politically well-connected and oftentimes (partly) state-controlled corporations, many of which are listed at the country’s two stock exchanges in Shanghai and Shenzhen (Allen et al, 2005; Lardy, 2019). For entrepreneurs, strong, ambiguous government involvement in the economy can be expected to affect business success, and relations with suppliers and customers (Luo et al, 2020), and creates its own kind of opportunity for entrepreneurial behavior: In the extreme, Mou Qizhong of Nande Group, for which brokerage across industries via government infrastructure was a core competence—fraught with the danger of shifting opinion about what is politically acceptable—ended in jail when opinion shifted negative (Yang, 2007, Chapter. 7; case snippet in Yang, 2004).…”

mentioning

confidence: 99%

Political Connection and Disconnection: Still a Success Factor for Chinese Entrepreneurs

Burt

Opper

2020

Entrepreneurship Theory and Practice

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Political connection in China is often tested for correlation with business success and government support under a suspicion that connected entrepreneurs enjoy special favors and protection. Research evidence is mixed. In revisiting the debate on political capital in China, we apply a socially embedded perspective on political connection. To this end we introduce two methodological innovations: (a) We develop a broader measure of political connectedness that covers the continuum from political connection to disconnection. (b) We integrate data on political connection with social network data. Specifically, we explore how the social structure around the individual entrepreneur affects performance above and beyond the often tested association between political ties and performance. We draw two conclusions: (1) The success association with political connection is discontinuous. Advantage is less for entrepreneurs weakly connected politically, but significant additional disadvantage arises for the politically disconnected. (2) The additional is that entrepreneurs disconnected from government show no benefit from having an advantaged business network. The politically connected with an advantaged business network show more prosperous business, higher returns on assets, and more likely survival over time. The politically disconnected show none of these benefits. We caution the entrepreneur who plans to ignore the government.

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“…Some studies also highlight the dark side of developing government or political connections. For example, Su et al (2015) report that political networking in China weakens the positive linkage between entrepreneurial orientation and new venture performance while, in a recent paper, Luo et al (2020) reveal that political relationship building by Chinese new ventures can be an obstacle for customer acquisition because of concerns about certainty of payments and levels of control. have studied changes of entrepreneurs' political networking over time and found that more recent Chinese entrepreneurs built fewer political networks compared to entrepreneurs that started earlier, and that the focus of networking behavior has shifted from the establishment of ties with bureaucrats towards the management of such ties.…”

Section: Network Of Entrepreneursmentioning

confidence: 99%

“…Furthermore, in order to obtain entrepreneurial finance, it is highly important for new ventures to leverage their human and social capital, which are strongly considered by investors in East Asia (Wang, 2016;Zacharakis et al, 2007). Finally, while networking generally has been found to be very important for East Asian new ventures, recent studies indicate that political networking, which appears to have been particularly prevalent in China, may result in problematic outcomes, such as weakening the effectiveness of entrepreneurial orientation (Su et al, 2015) or becoming an obstacle for acquiring customers (Luo et al, 2020). These findings suggest that new venture entrepreneurs should subsequently focus on developing business ties in their networking activities.…”

Section: Practical Implicationsmentioning

confidence: 99%

New venture entrepreneurship and context in East Asia: a systematic literature review

et al. 2021

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While research on new venture entrepreneurship has been predominantly conducted in Western countries, East Asian start-ups have gained global relevance in recent years. In this article, we systematically review studies on new venture entrepreneurship in East Asia published in Social Science Citation Index (SSCI)-listed journals between 2000 and 2020 and find that the number of papers annually published has been rapidly increasing. However, the research body is highly unbalanced, as most articles are single-country studies focused on China, apply a quantitative methodology, and concentrate on topics such as entrepreneurial strategies and new venture entrepreneurs’ personal attributes and networks. Moreover, a majority of studies provides no or only a weak consideration of the national or subnational context. More strongly contextualized research on countries such as Japan and South Korea and on less studied themes such as culture, entrepreneurial financing, entrepreneurial teams, new venture internationalization and new venture entrepreneurial intention is desirable.

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Can One Stone Kill Two Birds? Political Relationship Building and Partner Acquisition in New Ventures

Cited by 32 publications

References 51 publications

How much state ownership do hybrid firms need for better performance?

How much state ownership do hybrid firms need for better performance?

Political Connection and Disconnection: Still a Success Factor for Chinese Entrepreneurs

New venture entrepreneurship and context in East Asia: a systematic literature review

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