Private Entrepreneurs’ Political Participation and Strategy Making of their Firms: Evidence from China

This paper examines whether and how private entrepreneurs’ political participation, an increasingly popular form of corporate political activities in transitional economies, influences the strategy making of their firms. In a nationwide sample of over 3,000 privately owned enterprises in China, we find that private entrepreneurs’ direct political participation affects the strategy making of their firms by influencing both the entrepreneurs’ motivations and their capabilities. More specifically, we find that political participation boosts private entrepreneurs’ self-perceived social status and resource acquisition abilities, which in turn prompts their firms’ to undertake strategic deviance and risk-taking strategies. This study enriches our understanding of corporate political strategy by illuminating the mechanisms through which political participation of private entrepreneurs affects their firms’ business strategies.