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, ...