Closing the Revolving Door: What if Board Political Connections Are Permanently Broken?

Jyun-Ying Fu, Pei Sun

Research output: Contribution to journalArticlepeer-review

Abstract

Politically connected firms critically rely on their sociopolitical capital to compete; however, a policy-induced loss of board political connections may pose a serious challenge for focal firms and prompt them to develop compensatory moves. Drawing upon resource dependence theory and the nonmarket strategy literature, we examine if and how focal firms may address this challenge through intensifying their bribery activities. Following a year 2013 policy shock that closed the revolving door between former government officials and connected firms in China, we identify a substantial increase of bribery expenditure in a sample of public corporations whose political independent directors were forced by the central government to resign in the subsequent years. Furthermore, we investigate how the strength of this response varies with a host of firm-level contingencies that capture dependence scope and dependence asymmetry in the business-government dyad at the time of the policy announcement. Our study contributes to strategy and governance literatures by demonstrating how firms restructure power relationships after the loss of board political capital. It also sheds light on the regulation of revolving doors under weak institutions by revealing the irony of a well-intentioned “anticorruption” government policy.
Original languageEnglish
Number of pages37
JournalJournal of Management
DOIs
Publication statusAccepted/In press - 2 Apr 2023

Fingerprint

Dive into the research topics of 'Closing the Revolving Door: What if Board Political Connections Are Permanently Broken?'. Together they form a unique fingerprint.

Cite this