Printer Friendly

Political strategy of Chinese private ventures: an organizational life cycle framework.


Drawing upon insights from multiple theories on corporate political strategy, this study proposes an organizational life cycle framework for explaining Chinese ventures' political strategies. The model suggests that Chinese private ventures exhibit different motivations, objectives and approaches in their political strategies at different life-cycle stages, due to changes in the environmental and institutional constraints and their organizational dominant problems. To better understand Chinese private ventures' political strategies, researchers need to take into account both the environmental and organizational contexts at each stage under which the venture's political strategies are developed.


Scholars have long recognized the importance of political strategies in affecting firm behavior and performance (Getz, 1997; Hillman & Hitt, 1999; Hillman, Keim & Schuler, 2004; Hillman, Zardkoohi & Bierman, 1999; Keim & Baysinger, 1988; Masters & Baysinger, 1985; Masters & Keim, 1985). Because government policies have significant effects on competitive environment of firms, companies may employ political strategies or actions (such as lobbying, advocacy advertising, political campaign contribution, etc.) to create a favorable external environment, and to gain competitive advantages over their rivals. Current research on corporate political strategy, however, is largely conducted on Western companies, especially in the setting of multinational corporations (e.g., Blumentritt & Nigh, 2002; Chen, 2007; Hillman, 2003; Kennedy, 2007). The political strategy of private ventures in a non-Western country (such as China) is a much-understudied area. Given the increasing influence of private sector in Chinese national (ADB, 2003; Dougherty, Herd & He, 2007), and the significant power of government policies on the development of private ventures in China, knowledge about political strategies of Chinese private ventures becomes imperative.

This paper aims to enrich the research of corporate political strategy by building a descriptive theory for understanding Chinese private ventures' political strategies. Adopting an organizational life cycle approach, and drawing upon insights of multiple theories such as the resource-dependence theory (Pfeffer & Salancik, 1978), institutional theory (Dimaggio & Powell, 1983; Powell & DiMaggio, 1991), strategic choice theory (Child, 1972), exchange theory (Cook, 1977) and the resource-based view (Barney, 1991; Wernerfelt, 1984), the paper builds a framework to explain how the environmental and organizational factors influence political strategies of Chinese private ventures at different life-cycle stages. Since China differs sharply from Western countries in political, societal and cultural environment, I hope this study offer an opportunity to refine and test existing theories, and to further our understanding of corporate political strategy by focusing on emerging economies. The premise of the life cycle framework is that at different developmental stages, Chinese private ventures exhibit different motivations, objectives, and often take different approaches for their political strategies, due to different external and internal environments. Prior research has suggested that a firm's political strategy changes over time as it faces different sets of opportunities and threats from the environment, however less research has been done on the change of a firm's political strategy (Getz, 1997). This study therefore answers this research call as well.


Government business policies affect firms' competitive advantages significantly (Keim & Baysinger, 1988). Government has the ability to do so because it can influence the opportunity sets faced by the firms and affect their competitive environment through regulations and government policies (Hillman & Hitt, 1999; Hillman et al., 1999). Acts of government create individual winners and losers in the marketplace (Leone, 1986). Because of the significance of government intervention, firms compete in their market environment and in their non-market environment (Baron, 1999). By developing political strategies, firms create favorable environment for their market competition, therefore gaining economic rents or sustain their competitive advantages which they cannot achieve elsewhere (Gale & Buchholz, 1987). In a restatement of a definition put forth by Keim and Baysinger(1988), Schuler (1996: 721) defined corporate political strategy is "a pattern in a stream of managerial decisions that represent an integrated set of activities within a firm intended to produce public policy outcomes favorable to the firm's economic survival and continued success". Typical political strategies include lobbying, campaign contribution, coalition building, and information provision, etc. (Baron, 1999). The definition of political strategy in this paper, however, is narrower than Schuler's definition. The discussion of political strategy here focuses only on firm's actions or endeavors undertaken in the government arena, therefore does not include public affairs functions. For this research, firm political strategy is defined as any deliberate actions or strategies a firm takes to influence government policy or process.

Scholars have employed different theories to explain the basic questions of firm political strategy, i.e., why and how a firm engages in political strategies, and what types of political strategies a firm takes (Getz, 1997). These theories include resource dependence theory (Pfeffer & Salancik, 1978), institutions theory (Dimaggio & Powell, 1983), strategic choice theory (Child, 1972; Cyert & March, 1963), exchange theory (Cook, 1977) (see Getz, 1997 for a detailed review), and more recently, the resource-based view of the firm (Barney, 1991). Although I am not going to repeat a full-length literature review here, a brief overview of these theories is necessary. Especially, I am interested in the theories which are especially relevant to the context of Chinese transitional economy. These include the resource dependence theory, institutional theory, strategic choice theory, exchange theory, and the resource-based view.

Resource Dependence Theory

According to the resource-dependence theory (Pfeffer & Salancik, 1978), a firm needs to respond to environmental pressures by obtaining and allocating necessary resources. The assumptions of this theory include (1) organizations are assumed to be comprised of internal and external coalitions which emerge from social exchanges that are formed to influence and control behavior; (2) the environment is assumed to contain scarce and valued resources essential to organizational survival and there is always uncertainty for the firm to acquire these resources; (3) organizations must work to reduce their dependence on other actors and/or to increase their dependence on themselves by acquiring relevant resources. The implication of these assumptions is that firms can build competitive advantages by enhancing their power on external actors through resource acquisition and allocation. One of the most important external forces is government policy. The resource dependence theory has been widely employed in the literature of corporation political strategy as a major theoretical basis (e.g., Baysinger, 1984; Hillman & Keim, 1995; Meznar & Nigh, 1995; Yoffie, 1987). The underlying rationale is that firms use political strategies to lower their dependence on the government, and to reduce the uncertainties related to that dependence (Getz, 1997).

Institutional Theory

The institutional theory underlines the importance of norms and expectations in determining organizational behavior (Dimaggio & Powell, 1983; Meyer & Rowan, 1977). In general, institutions consists of three components: cultural-cognitive, normative, and regulative elements (Scott, 1995). Researchers in organization and management have adopted the institutional theory to explain how social structure, including schemas, rules, norms, and routines, as authoritative guidelines for social behavior, influences the formation and process of organization (Scott, 1995). In area of strategic management, an institutional-based view of firm strategy highlights the roles of institutions on firm strategic choices (Peng, 2002). Scholars from this perspective argue that firms take political strategy or action to obtain favorable public image and organizational legitimacy (e.g., Hillman, 2003; Hillman & Wan, 2005; Oberman, 1993). Since institutions are different across boarder and cultures, firms in different countries or institutional environments may take different approaches to their political strategies or actions (Hillman et al., 1995). Evidence has indicated that in transitional economies where market institutions are often less developed, firms tend to engage in various forms of political strategies or actions (Li, Meng & Zhang, 2006).

Strategic Choice Theory

Rooted in the behavioral theory of the firm (Cyert & March, 1963), strategic choice theory asserts that organizational structure and practice affect the development of strategic actions (Child, 1972). This theory asserts that strategic choices start with consideration of relevant forces in the external environment. Organizations make strategic decisions from a range of options which are filtered and constrained by organizational characteristics and are consistent with the values, beliefs, and philosophies of decision makers. This perspective suggests that political strategy, as a form of firm strategic choice, is determined and adjusted by the firm's evaluation of external environment and projected organizational outcome. The determination to adopt political strategies is largely depended upon certain organizational characteristics. For example, Schuler and Rehbein (1995) proposed a model of corporate political strategy and argued that the organizational attributes of a firm such as structure, resources, political experience, issue resilience, and shareholder structure, play as a filter between the external environment and its political strategies.

Exchange Theory

Related to the resource dependence theory, exchange theory (Cook, 1977) highlights the interdependence between the firm and the external actors and emphasizes the exchange relationship between the parties. The theory posits that the rationale of political strategy lies in the transfer of the resource for mutual benefit between the focal firm and the external actors (Mitnick, 1993). In other words, firms take political strategies to gain or exploit advantages in exchange for mutual benefits perceived by the external actor, such as government and its agencies. Different from the resource dependence theory, the exchange theory argues that the power relationship between the firm and the government is more "interdependent", rather than "dependent" (Getz, 1997: 45).

The Resource-Based View

The resource-based view of the firm (Barney, 1991; Wernerfelt, 1984) argues that a firm's sustainable competitive advantage lies in the uniqueness of its composition and implementation of resources. Political resource, broadly defined as a portfolio of various resource elements which can be used in political activities, can be deployed by the firm as a strategic use to influence the government decision-making, and to realize firms' special political objectives (Boddewyn, 1994). Nicloas (2005) proposed eight types of political resources: expertise, financial resource, relational resource, organizational resource, reputation with other nonmarket actors, public image, support of stakeholders, and recreational skill. Most of studies from this perspective have focused on the process of development and exploitation of political resources. Few, however, have investigated how use of political resource contributes to competitive advantage and superior firm performance (except for Hillman et al., 1999; McWilliams, Van Fleet & Cory, 2002). From this perspective, a firm's participation in political strategies will be associated with its endowment and possession of various political resources.


The intervention of government in business development probably is the most distinct characteristics of Chinese transitional economy (Lu & Tang, 1997). The so-called "socialist market economy" represents a hybrid pattern of state-society relation that has been deliberately shaped by the government to ensure business development as well as state control (Pearson, 1997). Since the end of 1970's, China has experienced significant paradigm shift from a formerly central-planned economy to a market-based economy. Along with the economic reforms, changes have made on the political, legal, and administrative environment to accommodate the need for sustainable economic development. The relaxed domestic political and business environment, plus the embrace of globalization has stimulated the emergence and the rapid growth of private businesses in China. According to a report by Asia Development Bank on Chinese private enterprises, the private sector has reached to a momentum of 50% contribution of the whole nation's economy by 2002 (ADB, 2003). More recently, the Outlook Weekly, Xinhua News Agency's news magazine, reports that entrepreneurs and professionals contribute one third of the country's total tax revenues (cite from ChinaDaily, 2006). There has been significant climate change toward private enterprises in recent years. For example, in 2001 the Communist Party of China (CPC) extended membership to the owners of private businesses (Xinhua News, November 18, 2002). In 2007, the Chinese parliament passed China's first law to protect property rights after longtime debate by traditional ideological divisions.

Despite this climate change, Chinese private ventures still face various constraints from both the macro and the micro environment. First, although the National People's Congress had passed the first private property protection law, the law itself is still in its infancy. Due to the absence of private land ownership and lack of necessary legal system reform, the property measure may prove difficult to enforce. Government, to a large extent, still has strict control over land use. For example, research has found that local government, with strong incentives to boost fiscal revenues, often first attempts to acquire land use rights for public interests but then develop some of the land for commercial purpose (Zhang, 2006). In addition, China is still on its way to develop an effective financial system and other formal institutions (Sullivan, 1998) and the enforcement of such law is still difficult. Second, even though there have been some established formal institutions to protect property rights, the informal institutions are still lagging behind. The traditional ideology of repudiating property ownership imprinted in the central planning era still exists and the culture of respecting property rights has not been developed across the country (Li & Atuahene-Gima, 2001).

Private ventures often find it hard to compete against state-owned or joint ventures in acquiring critical resources for growth, such as land use rights and financial capital (Tsang, 1994; Tsang, 1996).

To strive for survival and growth, Chinese private ventures must be proactive and innovative in their strategic decision making (Tan, 2001). Various types of political strategies have been employed by private ventures. In an exploratory study, Wu (2006) summarized eight types of political strategies typically employed by Chinese private firms. These include government involvement, direct participation, government association, financial incentive, prolocutor, institution innovation, information consolation and social power mobilization. In another study, Gao and Tian (2006) looked at the differences of political actions between Chinese firms and Western companies. According to these authors, Chinese private firms share some of the political strategies such as information strategy, financial incentive strategy as Western firms, but many forms such as political campaign and constituency building are not seen in China, due to China's different political paradigm. Typical approaches also include direct political participation and other politic-related strategy such as inviting official to visit company or attend important occasions (Gao & Tian, 2006). In most cases, getting connected with government officials or people with such connections becomes critical in the private venture's political strategy (Ahlstrom, Bruton & Lui, 2000; Wank, 1996). While these studies are informative, theoretical framework is still lacking.


In this section I integrate multiple theoretical perspectives, including resource dependence theory, institutional theory, strategic choice theory, exchange theory and the resource-based view to present a conceptual model of political strategy of Chinese private ventures. Specifically, I propose a life-cycle framework to examine the firm's motivations, objectives and typical approaches of political strategies at three stages of development: (1) startup stage; (2) emerging and growth stage; and (3) mature stage. I (1) show that at any given developmental stage, certain organizational needs or tasks will be more important than others therefore become the major drivers of firm political strategy; (2) identify specific impacts of the state or local government on the venture's developmental needs at each stage (3) highlight specific political strategies or approaches a private venture takes to deal with government at that particular stage.

Theorists from organizational life cycle theory (Adizes, 1979; Greiner, 1972; Kimberly & Miles, 1980) suggest that an organization progresses sequentially through several major stages of development. A central premise of this theory is that as organizations move through various stages of growth, both organizational attributes and the major problems facing organizations change, resulting in the need for different resources, organizational priorities, and structural configurations (Kazanjian, 1988). Smith, Mitchell and Summer (1985) found that different developmental stages engender different priorities among top managers. Although scholars have different views on how these stages are defined and whether the stages can be clearly distinguished from each other, they tend to agree with a few common milestone stages. Following Smith et al. (1985), in this paper I consider three stages of a venture's development. First, the start-up stage as the venture seeks resources to get the business started; second, the emerging and growth stage, at which the venture expands its product and geographic market; and lastly, the mature stage, at which the venture enjoys stable cash flow and starts to seek opportunities for new growth. The overall model is depicted in figure 1.


Start-up Stage

Starting up a new business not only requires significant amount of manpower from the entrepreneur(s), but also requires various types of founding resources. A large body of research on entrepreneurship has emphasized the key roles of resources in new venture creation and development (e.g., Chandler & Hanks, 1998; Lichtenstein & Brush, 2001). New ventures often lack adequate resources due to their "liabilities of newness"(Stinchcombe, 1965). The dominant problem at this stage, is then to identify and acquire resources such as human, physical, financial, and social resources for starting up the business (Brush & Greene, 1996; Katz & Gartner, 1988). Although China's market-oriented reforms have successfully transformed a formal centrally-planned economy to a more market-based system, the government still hasn't relinquished its control over markets for certain critical resources, such as land and capital (ADB, 2003; Nee, 1992). Private ventures, unlike enterprises of other types of ownership (such as state-owned companies, joint ventures between state-owned and foreign companies, or collective enterprises), are in their disadvantageous positions in obtaining these critical resources. For example, private entrepreneurs often find it hard to obtain loans from banks, most of which are state-owned institutions (ADB, 2003; Batjargal & Liu, 2004; Brandt & Li, 2003; Tsang, 1994; Tsang, 1996). A survey conducted in East China's Zhejiang Province, which has the country's most active private economy, 45.7 percent of respondents say that getting financial funding is the biggest obstacle hampering the development of the private sector. In the same survey, about 66.7% respondents report that it is very hard for them to get loans from financial institutions (China Daily, 2004). Coupled with the under-developed and complicated private equity market(Batjargal & Liu, 2004), Chinese private ventures have high level of dependence on the state or local government in terms of acquiring critical resources such as land use rights and capital.

These challenges are associated with the low legitimacy status of Chinese private ventures. For decades, private businesses haven't obtained legal status in the PRC because they are not consistent with the dominant ideological value of the country (Tsang, 1996). After years of economic reforms and political debates, the status of private ventures have been gradually admitted by the government and finally been granted as legal status. Despite this constitutional change, however, the change of ideological value toward private businesses is still very slow (Li & Atuahene-Gima, 2001). As discussed earlier, the lack of private land ownership and lagged-behind legal development, private entrepreneurs are still struggling to enhance the status of themselves and their businesses to secure their interests (Bai, Lu & Tao, 2006).

The above political and institutional constraints have important implications for Chinese private ventures in their political strategies at their early stages. Acquiring and enhancing organizational resources and legitimacy is critically important to Chinese private ventures (Ahlstrom & Bruton, 2001). At the startup stage, Chinese private ventures must act proactively toward government to enhance their legitimacy, so they can be treated favorably or at least equally in terms of resource opportunities. Evidences indicate that at this stage getting government officials or people with government connections involved with their businesses is very common in Chinese private ventures (Ahlstrom et al., 2000). This co-opting strategy enhances the new venture's legitimacy, and provides the way to neutralize institutional opposition (Ahlstrom & Bruton, 2001; Tsang, 1996).

Summarizing the above arguments, I propose:

Proposition 1: During the start-up stage, Chinese private ventures engage in political strategies to obtain founding resources and to enhance organizational legitimacy. Typical approaches include government involvement and government association.

Emerging and Growth Stage

Once the venture is formed and starts to grow, the resource and the legitimacy constraints become less salient than that of the founding period. Scholars from the organizational life cycle theory argue that at this stage, problems such as sales and marketing, and strategic positioning become dominant to the venture (Kazanjian, 1988). Terpstra and Olson (1993) found empirical support for Kazajian's assertion. With this dominant problem change, the venture has more interactions with the constituents of its competitive environment, such as suppliers, distributors, customers, competitors, and regulators. Also, at this stage the venture has accumulated certain level of operational experience and organizational knowledge, which allows it to formulate certain product or market strategies for competition (Porter, 1980). Further, to obtain competitive advantages in the market the venture needs to constantly revisit the original strategic mission and to adjust current plans based on its evaluation of external and internal environment. Therefore political strategy, if developed, will reflect the firm's strategic and operational mission.

Peng (2002) asserted that although typically there are three strategies for firm growth (namely, generic growth; merge and acquisitions, and network and alliances); the first two are not common to Chinese ventures due to the lack of capable managers and functional factor market. He found that Chinese ventures often take network and alliances for growth strategies. This is particular important when the venture expands beyond its home-based market. Research has indicated that regional protectionism, in which provincial and city authorities establish market entry barriers that are designed to support local enterprises, is a major problem in Chinese economy (Ahlstrom et al., 2000; Bai, Du, Tao & Tong, 2004; Lee, 1998; Poncet, 2005; Yeung, 2000). Local government which largely relies on local industries for tax revenues and own political interests, has strong incentives to support local companies in competition against non-local businesses. For example, ad hoc taxes and fees are typically set up for a non-local business in China (Bai et al., 2004). More importantly, in China the local government has so much discretion in formulating local policies and 116 regulations that the policies can be very idiosyncratic and nontransparent to entrepreneurs (ADB, 2003). To alleviate such adversity, private ventures need to take proactive political strategies to seek necessary information and establish good relations with the authorities in target markets. Especially for a venture penetrating other provincial or city markets in a large scale, obtaining support from the authorities in both local and the target market is necessary. Companies are found to use networking, information consultation and even financial incentives to support their market growth (Gao & Tian, 2006). I argue that the higher the level of market heterogeneity and complexity, the more urgent the firm needs to employ political strategies to alleviate these operational challenges. Therefore, I propose:

Proposition 2: During the emerging and growth stage, Chinese private ventures engage in political strategies to alleviate threats from market heterogeneity and market complexity. Typical approaches include networking and information consultation.

Mature Stage

A venture at mature stage often attains strong cash flows and but slower growth rate, however the firm may try to reorganize to capture and realize opportunities for new growth (Galbraith, 1982). Smith, Mitchell and Summer (1985) found that at this stage top managers are more concerned with maintaining current structure of relations. More specifically, these authors argue that at the mature stage the political concerns become more frequent than other stages and become the essential priority of top managers.

For Chinese private ventures, developing and maintaining political resources becomes critical at this stage. The exchange theory (Cook, 1977) predicts that firms engage in political strategies to seek reciprocal favors from the government. In China, under the arrangement of decentralized fiscal system, local economic and social development (particularly tax revenues and local employment) have been two critical criteria for evaluation of local government's achievements (Bai et al., 2004). Therefore a matured venture with steady cash flow can be very important in contributing local economic and social development. The central government tends to give local authorities broad guidelines that allow for much flexibility in implementation to reflect local conditions (ADB, 2003). The deviations from central policies enable private entrepreneurs to manage their dependence on local authorities while giving officials new sources of income that buttress their power within jurisdictions (Wank, 1996). A matured private venture, with increasing social legitimacy and economic power, is more able to exert influences on government policies using the existing political resources. In matter of fact, the lack of private property protection legal system urges the owners of private ventures to actively seek more political resources which they can rely on to protect their accumulated personal wealth (Nee, 1992). Therefore developing political resources such as personal relationships with current or former government officials becomes more imperative than ever (Wank, 1996). A typical approach at this stage is direct political participation, such as being a member of government administrations, agencies, congresses, at both local and national level (Gao & Tian, 2006; Guiheux, 2006). As organizational structure is more formalized at this stage, inviting former or retired government officials to serve as board members or other positions is another way to develop political resources and to exchange favors. Another important approach is giving to charity (Ahlstrom et al., 2000). Unlike most developed countries where there is large scale presence of non-profit organizations, in China the charity giving is typically done through government agencies. In matter of fact to get more donations, the government often rewards private contributors with appointment to political councils, which in turn, enhances the social status and good relationship with the regulators (Ahlstrom et al., 2000; Ma & Parish, 2006). I argue that at the mature stage the relationships between private ventures and government authorities become more inter-dependent than any other stages. In summary, I propose:

Proposition 3: During the mature stage, Chinese private ventures engage in political strategies to strengthen business-government relationships and to exchange favors with the authorities. Typical approaches include direct political participation, financial incentives or other political-related strategy such as charity giving.


Strategy scholars have long emphasized the "fit" between strategy and its external environment (Anderson & Zeithaml, 1984; Prescott, 1986). The environment-strategy co- alignment means that the firm's strategy needs to be deployed to the specific requirements of its environmental context (Venkatraman & Prescott, 1990). Although this argument is typically applied to market strategy, applying it to non-market strategy is appropriate. The basic premise of this paper is that during its life cycle, a Chinese private venture exhibit different motivations, objectives and specific approaches as to its political strategies toward government. The choices of political strategies are largely determined by the external constraints they face and the internal organizational dominant problems they have for that particular stage.

I briefly reviewed theories that have been used for explaining corporation political strategy. Among these theories, I argue that the resource-dependence theory, institutional theory; strategic choice theory, exchange theory and the resource-based view all have merits in explaining Chinese private ventures' political strategies. I propose a life-cycle model to explain the major drivers of political strategies at each developmental stage of the venture. I argue that at the startup stage the resource and legitimacy concerns propel Chinese ventures to engage in political strategies. Due to its weak regulatory regime, underdeveloped factor market, widespread dysfunctional competition, and poorly protected property rights, Chinese transitional economy has been characterized as a hostile environment for entrepreneurs (Lukas, Tan & Hult, 2001). The environment is even more hostile to private ventures as they suffer from low level of legitimacy in Chinese society, which leads to their disadvantageous positions when competing against state-owned counterparties for critical resources. Unlike the Western firms where top managers are more concerned with political strategies or actions at the later stage of development (Smith et al., 1985), Chinese private entrepreneurs have to employ political strategies for founding resources from the very beginning. Enhancing organizational legitimacy therefore becomes the first priority of the venture at this particular stage.

I argue that at the emerging and growth stage, the heterogeneous market structures, the unequal developments of regional economies, and the widespread practices of local protectionism, are the major environmental constraints for private ventures. To alleviate negative impacts from this complex environment and strive for strategic competitiveness, private ventures choose political strategies to obtain necessary informational resources and administrative support for their product and market strategies. Alleviating market and administrative adversities to achieve operational excellence becomes the major driver of the venture's political strategy at this growth stage.

Finally, the model proposes that when the venture grows to the mature stage, the power relationship between the firm and the government will change. As a mature business, the venture will have established a bundle of organizational resources and social capital (Coleman, 1988), including the relations with local authorities, which allows the venture to use as leverages in their political strategies. Local authorities, on the other hand, have to rely on successful private ventures for their support in regional economic and social development. I propose that at this stage a major driver of political strategy is developing and maintaining various forms of political resources with the authorities. This not only helps protect the owners' personal interests, but also provides the venture advantages in capturing new growth opportunities.

In conclusion, in this research I build a descriptive theory on Chinese private ventures' political strategies. By integrating multiple theoretical views, and applying an organizational life cycle approach, this research is among the first to study how Chinese private ventures' political strategies change over time. The model suggests that Chinese private ventures exhibit different motivations, objectives and typical approaches at different developmental stages. The research has several theoretical and managerial implications. First, the model implies that to better understand the political strategies of Chinese private ventures, multiple theoretical perspectives seem necessary. Second, the study enriches current literature of political strategies by extending attention to an important yet largely ignored area--private ventures in China's transitional economy. I propose that political strategies are essential to Chinese private entrepreneurial firms. Researchers in Chinese entrepreneurial firms should not overlook the role of political strategies in the process of entrepreneurship in China (Guiheux, 2006; Tan, 1996). Thirdly, the study highlights some of the differences between Chinese ventures and Western firms in political strategies. I found that contrary to companies in developed countries, who may use non-market strategies as optional strategies at later developmental stage, Chinese private ventures must develop certain types of political strategies from the very beginning. Further, the study fills the gap in previous literature by examining the change of a firm's political strategy over time (Getz, 1997). To have a better understanding of firm political strategy, future studies need to take into account the contextual factors under which the firm's political strategies are developed. Practically, the proposed model informs entrepreneurs that to achieve sustainable competitiveness, a Chinese private venture must constantly evaluate its environmental and organizational environment, and develop the most appropriate political strategies toward the government. Nevertheless, the conceptual model awaits empirical validation when data is available. It is my hope that the study shed some light on the research of political strategy, and has provided valuable implications for Chinese private entrepreneurs as well as policy makers.


ADB. (2003). People's Republic of China: The Development of Private Enterprise Manila, Philippines: Asia Development Bank.

Adizes, I. (1979). Organizational Passages--Diagnosing and Treating Lifecycle Problems of Organizations. Organizational Dynamics, 8(1), 3-25.

Ahlstrom, D., & Bruton, G. D. (2001). Learning from Successful Local Private Firms in China: Establishing Legitimacy. Academy of Management Executive, 15(4), 72-83.

Ahlstrom, D., Bruton, G. D., & Lui, S. (2000). Navigating China's Changing Economy: Strategies for Private Firms. Business Horizons, 43(1), 5-15.

Anderson, C. R., & Zeithaml, C. P. (1984). Stage of the Product Life-Cycle, Business Strategy, and Business Performance. Academy of Management Journal, 27(1), 5-24.

Bai, C.-E., Du, Y., Tao, Z., & Tong, S. Y. (2004). Local Protectionism and Regional Specialization: Evidence from China's Industries. Journal of International Economics, 63(2), 397-417.

Bai, C.-E., Lu, J., & Tao, Z. (2006). Property Rights Protection and Access to Bank Loans. Evidence from Private Enterprises in China*. The Economics of Transition, 14(4), 611-628.

Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99-120.

Baron, D. P. (1999). Corporate Political Action: Rethinking the Economic and Organizational Influences. Business and Politics, 1(1), 83-97.

Batjargal, B., & Liu, M. N. (2004). Entrepreneurs' Access to Private Equity in China: The Role of Social Capital. Organization Science, 15(2), 159-172.

Baysinger, B. D. (1984). Domain Maintenance as an Objective of Business Political Activity--an Expanded Typology. Academy of Management Review, 9(2), 248-258.

Blumentritt, T. P., & Nigh, D. (2002). The Integration of Subsidiary Political Activities in Multinational Corporations. Journal of International Business Studies, 33(1), 57-77.

Boddewyn, J. J. (1994). International-Business Political-Behavior--New Theoretical Directions. Academy of Management Review, 19(1), 119-143.

Brandt, L., & Li, H. (2003). Bank Discrimination in Transition Economies: Ideology, Information, or Incentives? Journal of Comparative Economics, 31(3), 387.

Brush, C. G., & Greene, P. (August, 1996). Resources in the New Venture Creation Process: Strategies for Acquisition. Academy of Management Annual Conference. Cincinnati, OH.

Chandler, G. N., & Hanks, S. H. (1998). An Examination of the Substitutability of Founders Human and Financial Capital in Emerging Business Ventures. Journal of Business Venturing, 13(5), 353-369.

Chen, Y.-R. R. (2007). The Strategic Management of Government Affairs in China: How Multinational Corporations in China Interact with the Chinese Government. Journal of Public Relations Research, 19(3), 283306.

Child, J. (1972). Organizational Structure, Environment, and Performance: The Role of Strategic Choice. Sociology, 6, 1-22.

China Daily. (2004). Financial Help Vital for Private Businesses. Beijing: China Daily. Retrieved January 8, 2008 from

China Daily. (2006). Professionals, Entrepreneurs New Pillar of China. China Daily. Retrieved January 8, 2008 from

Coleman, J. S. (1988). Social Capital in the Creation of Human Capital. American Journal of Sociology, 84, S95-S120.

Cook, K. S. (1977). Exchange and Power in Networks of Interorganizational Relations*. The Sociological Quarterly, 18(1), 62-82.

Cyert, R. M., & March, J. G. (1963). A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall. Dimaggio, P., & Powell, W. (1983). The Icon Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. American Sociological Review, 48, 147-160.

Dougherty, S., Herd, R., & He, P. (2007). Has a Private Sector Emerged in China's Industry? Evidence from a Quarter of a Million Chinese Firms. China Economic Review (1043951X), 18(3), 309-334.

Galbraith, J. (1982). The Stage of Growth. Journal of Business Strategy, 3(1), 70-79.

Gale, J., & Buchholz, R. A. (1987). The Political Pursuit of Competitive Advantage: What Business Can Gain from Government. In A. A. Marcus, A. M. Kauffman and D. R. Beam (Eds.), Business Strategy and Public Policy Perspectives from Industry and Academia. Westport, CN: Quorum Books.

Gao, Y., & Tian, Z. (2006). A Comparative Study on Corporate Political Action in China. Journal of American Academy of Business, Cambridge, 8(1), 67-72.

Getz, K. A. (1997). Research in Corporate Political Action. Business & Society, 36(1), 32.

Greiner, L. E. (1972). Evolution and Revolution as Organizations Grow. Harvard Business Review, 50(4), 37-46.

Guiheux, G. (2006). The Political "Participation" Of Entrepreneurs: Challenge or Opportunity for the Chinese Communist Party? Social Research, 73(1), 219-244.

Hillman, A., & Keim, G. (1995). International Variation in the Business-Government Interface-Institutional and Organizational Considerations. Academy of Management Review, 20(1), 193-214.

Hillman, A. J. (2003). Determinants of Political Strategies in Us. Multinationals. Business & Society, 42(4), 455-484.

Hillman, A. J., & Hitt, M. A. (1999). Corporate Political Strategy Formulation: A Model of Approach, Participation, and Strategy Decisions. Academy of Management Review, 24(4), 825-842.

Hillman, A. J., Keim, G. D., & Schuler, D. (2004). Corporate Political Activity: A Review and Research Agenda. Journal of Management, 30(6), 837-857.

Hillman, A. J., & Wan, W. P. (2005). The Determinants of MNE Subsidiaries' Political Strategies: Evidence of Institutional Duality. Journal of International Business Studies, 36(3), 322-340.

Hillman, A. J., Zardkoohi, A., & Bierman, L. (1999). Corporate Political Strategies and Firm Performance: Indications of Firm-Specific Benefits from Personal Service in the Us Government. Strategic Management Journal, 20(1), 67-81.

Katz, J., & Gartner, W. B. (1988). Properties of Emerging Organizations. Academy of Management Review, 13(3), 429441.

Kazanjian, R. K. (1988). Relation of Dominant Problems to Stages of Growth in Technology-Based New Ventures. Academy of Management Journal, 31(2), 257-279.

Keim, G., & Baysinger, B. (1988). The Efficacy of Business Political Activity--Competitive Considerations in a Principal-Agent Context. Journal of Management, 14(2), 163-180.

Kennedy, S. (2007). Transnational Political Alliances:An Exploration with Evidence from China. Business & Society, 46(2), 174-200.

Kimberly, J. R., & Miles, R. H. (1980). The Organizational Life Cycle. San Francisco: Jossey-Bass.

Lee, P. K. (1998). Local Economic Protectionism in China's Economic Reform. Development Policy Review, 16(3), 281303.

Leone, R. A. (1986). Who Profits: Winners, Losers and Government Regulation. New York, NY: Basic Books.

Li, H., Meng, L., & Zhang, J. (2006). Why Do Entrepreneurs Enter Politics? Evidence from China. Economic Inquiry, 44(3), 559-578.

Li, H. Y., & Atuahene-Gima, K. (2001). Product Innovation Strategy and the Performance of New Technology Ventures in China. Academy of Management Journal, 44(6), 1123-1134.

Lichtenstein, B. M. B., & Brush, C. G. (2001). How Do "Resource Bundles" Develop and Change in New Ventures? A Dynamic Model and Longitudinal Exploration. Entrepreneurship Theory and Practice, 25(3), 37.

Lu, D., & Tang, Z. (1997). State Intervention and Business in China: The Role of Preferential Policies. Cheltenham: Edward Elgar.

Lukas, B. A., Tan, J. J., & Hult, G. T. M. (2001). Strategic Fit in Transitional Economies: The Case of China's Electronics Industry. Journal of Management, 27(4), 409-429.

Ma, D., & Parish, W. L. (2006). Tocquevillian Moments: Charitable Contributions by Chinese Private Entrepreneurs. Social Forces, 85(2), 943-964.

Masters, M. F., & Baysinger, B. D. (1985). The Determinants of Funds Raised by Corporate Political-Action Committees--an Empirical-Examination. Academy of Management Journal, 28(3), 654-664.

Masters, M. F., & Keim, G. D. (1985). Determinants of Pac Participation among Large Corporations. The Journal of Politics, 47(4), 1158-1173.

McWilliams, A., Van Fleet, D. D., & Cory, K. D. (2002). Raising Rivals' Costs through Political Strategy an Extension of Resource-Based Theory. Journal of Management Studies, 39(5), 707-723.

Meyer, J., & Rowan, B. (1977). Institutionalized Organizations: Formal Structure as Myth and Ceremony. American Journal of Sociology, 83(2), 340-363.

Meznar, M. B., & Nigh, D. (1995). Buffer or Bridge--Environmental and Organizational Determinants of Public Affairs Activities in American Firms. Academy of Management Journal, 38(4), 975-996.

Mitnick, B. M. (1993). The Strategic Use of Regulation--and Deregulation. In B. M. Mitnick (Ed.), Corporate Political Agency: The Construction of Competition in Public Affairs: 67-89. Newbury Park, CA: Sage.

Nee, V. (1992). Organizational Dynamics of Market Transition--Hybrid Forms, Property-Rights, and Mixed Economy in China. Administrative Science Quarterly, 37(1), 1-27.

Nicolas, D. (2005). A Contribution to the Conceptualization of Political Resources Utilized in Corporate Political Action. Journal of Public Affairs, 5(1), 43-54.

Oberman, W. D. (1993). Strategy and Tactic Choice in an Institutional Resource Context. In B. M. Mitnick (Ed.), Corporate Political Agency: The Construction and the Theory of Groups: 213-241. Cambridge, MA: Harvard University Press.

Pearson, M. M. (1997). China's New Business Elite: The Political Consequences of Economic Reform. Berkeley, CA: University of California Press.

Peng, M. W. (2002). Towards an Institution-Based View of Business Strategy. Asia Pacific Journal of Management, 19(2/3), 251.

Peng, M. W., & Heath, P. S. (1996). The Growth of the Firm in Planned Economies in Transition: Institutions, Organizations, and Strategic Choice. Academy of Management Review, 21(2), 492-528.

Pfeffer, J., & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependency Perspective. New York: Harper & Row.

Poncet, S. (2005). A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration. Review of International Economics, 13(3), 409-430.

Porter, M. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press.

Powell, W., & DiMaggio, P. (Eds.). 1991. The New Institutionalism in Organizational Analysis. Chicago, IL: University of Chicago Press.

Prescott, J. E. (1986). Environments as Moderators of the Relationship between Strategy and Performance. Academy of Management Journal, 29(2), 329-346.

Rehbein, K., & Schuler, D. A. (1995). The Firm as a Filter: A Conceptual Framework for Corporate Political Strategies. Academy of Management Proceedings, 406-410.

Schuler, D. A. (1996). Corporate Political Strategy and Foreign Competition: The Case of the Steel Industry. Academy of Management Journal, 39(3), 720-737.

Scott, W. R. (1995). Institutions and Organizations. Thousand Oaks, CA: Sage.

Smith, K. G., Mitchell, T. R., & Summer, C. E. (1985). Top Level Management Priorities in Different Stages of the Organizational Life-Cycle. Academy of Management Journal, 28(4), 799-820.

Stinchcombe, A. L. (1965). Social Structure and Organizations. In J. G. March (Ed.), Handbook of Organizations: 142193. Chicago: Rand McNally & Company.

Sullivan, J. D. (1998). Institutions and Private Sector Development. China Economic Review (1043951X), 9(1), 85.

Tan, J. (1996). Regulatory Environment and Strategic Orientations in a Transitional Economy: A Study of Chinese Private Enterprise. Entrepreneurship Theory and Practice, 21(1), 31.

Tan, J. (2001). Innovation and Risk-Taking in a Transitional Economy: A Comparative Study of Chinese Managers and Entrepreneurs. Journal of Business Venturing, 16(4), 359-376.

Terpstra, D. E., & Olson, P. D. (1993). Entrepreneurial Start-up and Growth: A Classification of Problems. Entrepreneurship Theory and Practice, 17(3), 5.

Tsang, E. W. K. (1994). Threats and Opportunities Faced by Private Businesses in China. Journal of Business Venturing, 9(6), 451-468.

Tsang, E. W. K. (1996). In Search of Legitimacy: The Private Entrepreneur in China. Entrepreneurship Theory and Practice, 21(1), 21-30.

Venkatraman, N., & Prescott, J. E. (1990). Environment Strategy Coalignment--an Empirical-Test of Its Performance Implications. Strategic Management Journal, 11(1), 1-23.

Wank, D. L. (1996). The Institutional Process of Market Clientelism: Guanxi and Private Business in a South China City. The China Quarterly(147), 820-838.

Wernerfelt, B. (1984). A Resource-Based View of the Firm. Strategic Management Journal, 5(2), 171180.

Wu, W. (2006). The Relationship among Corporate Political Resources, Political Strategies, and Political Benefits of Firms in China: Based on Resource Dependency Theory. Singapore Management Review, 28(2), 85-98.

Yeung, H. W.(2000). Local Politics and Foreign Ventures in China's Transitional Economy: The Political Economy of Singaporean Investments in China. Political Geography, 19(7), 809-840.

Yoffie, D. B. (1987). Corporate Strategies for Political Action: A Rational Model. In A. A. Marcus, A. M. Kaufman and D. R. Beam (Eds.), Business Strategy and Public Policy. New York, NY: Quorum.

Zhang, X. (January, 2006). Asymmetric Property Rights in China's Economic Growth. Annual American Economics Association Meetings. Boston.

Jun Li, University of New Hampshire
COPYRIGHT 2008 The DreamCatchers Group, LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2008 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Li, Jun
Publication:International Journal of Entrepreneurship
Geographic Code:9CHIN
Date:Jan 1, 2008
Previous Article:Effects of factors influencing capital formation and financial management on the performance and growth of small manufacturing firms in Senegal:...
Next Article:Letter from the editor.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters