07.01.2022

Politicians, Political Ideology, and Firms in China

王丹青 | DU, Fei | MARQUIS, Christopher

Firms’ survival often depends on their political participation, such as campaign donations and lobbying efforts. This is especially true in emerging markets, where the government has tight control of the economy and society. However, the success of firms’ political strategies hinges on what politicians think about interacting with the business sector. Are they economically driven, or does political ideology also influence their decision to join hands with firms? HKUST’s Danqing Wang and her colleagues investigated this question in China, where the echoes of an orthodox communist ideology, opposing capitalism, can still be heard.

Under the rule of Mao Zedong, any form of private ownership was strictly prohibited. China’s “reform and opening up” from 1978 veered sharply away from orthodox communism, and is understood as an era of economic growth and modernization. Today, private firms in China can gain political appointments. However, “the success of their political participation hinges largely on politicians’ discretion,” the authors explain, “given that the deputy selection process is strongly controlled by the party.”

The authors hypothesized that politicians who joined the communist party before 1978 hold more anti-capitalist beliefs, and so are less inclined to support alliances with private firms. “Politicians who experienced the Cultural Revolution at a young age,” they add, “are even more likely to be suspicious of the private business sector and less likely to endorse business leaders as political deputies.”

At the core of these predictions is the psychological process of “imprinting,” through which worldviews are formed and crystalized during early adulthood. Given China’s unique history of ideological transformation, Chinese politicians who grew up in different periods were imprinted with very different ideological beliefs and values. “Such ideological imprints shape their attitudes and perceptions toward interactions with the business sector,” the researchers hypothesized.

To explore this theory, the authors collected data on mayors serving in cities across China, as the key decision makers responsible for firms’ political appointments. Forty percent of the mayors had joined the communist party during Chairman Mao’s tenure. The researchers also calculated the number of private firms appointed to local councils in each city.

Their analysis revealed that fewer private firms were appointed to local councils when mayors had a strong communist (anti-capitalist) ideology. “Such a negative effect is stronger for mayors who experienced an extreme ideological environment (the Cultural Revolution) in their youth,” the authors add. Imprinted values therefore have an enduring effect on politicians’ decisions to endorse local firms’ political participation.

Making a novel contribution, the authors also found that these imprinted communist ideals were shaped by the environment. Working in regions with a stronger communist legacy strengthened the mayors’ imprinted communist ideology, making them more hostile to the private sector. Conversely, imprinting had decayed in more economically developed cities. “Imprints, although they may be persistent, do in fact change over time and exist at different intensities,” explain the authors.

Crucially, these novel findings emphasize the importance of examining the values of individual politicians when considering firms’ political participation, particularly in transitional economies. “This helps to explain why firms’ political strategies do not always yield successful outcomes,” say the researchers. As well as benefiting firms, the findings may have wider implications for emerging markets, where social stability is often affected by state–firm interactions.

王丹青

Assistant Professor
Management