Ying Chen, Danglun Luo and Weiwen Li
The purpose of this paper is to propose, by drawing on the resource-based view (RBV) and economic regulation theory, that companies with political connections are more likely to…
Abstract
Purpose
The purpose of this paper is to propose, by drawing on the resource-based view (RBV) and economic regulation theory, that companies with political connections are more likely to enter into industries with high entry barriers, as they are more likely to obtain entry permits from the government and can gain more benefits after entering these industries. Managers’ political connections are a crucial determinant of firm scope. Although the existing research on this topic has shown that firms tend to use political connections to increase their scope, it remains unclear which industries companies with political connections choose to enter. Drawing on the resource-based view and economic regulation theory, we propose that companies with political connections are more likely to enter into industries with high entry barriers, as they are more likely to obtain entry permits from the government and can gain more benefits after entering these industries.
Design/methodology/approach
Data on a sample of Chinese listed privately owned enterprises were used and the findings support the main predictions.
Findings
The findings support the main predictions.
Originality/value
The research findings of this study contribute to the existing research on political connections and strategic choices.