When competition meets connections: The asymmetric effects of political ties on firm survival and efficiency

Weiting Zheng and Kulwant Singh

Journal of Business Research, 2025, vol. 200, issue C

Abstract: Firms frequently use political strategy to address market competition. We examine how corporate political ties, a key form of political strategy, moderate the effects of competition on two distinct firm-level outcomes: firm survival and efficiency. We argue that by disrupting market-based mechanisms, political ties can shield firms from competition, reducing their survival risks, but simultaneously impairing efficiency gains arising from competition. To further explore these theoretical mechanisms, we examine how ties to different political actors (local vs. central governments) moderate competition originating from different geographic sources (local vs. national competition). We test our hypotheses on China’s TV manufacturing industry (1993 – 2003), a context characterized by deregulation and intensified competition. Results support our thesis that political ties shield firms from competitive threats to firm survival at the cost of reduced efficiency. Our study underscores the importance of disaggregating firm outcomes, political ties, and competition for understanding the multifaceted effects of political ties in competitive environments.

Keywords: Non-market strategy; Political ties; Competition; Survival; Efficiency; China (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:200:y:2025:i:c:s0148296325004527

DOI: 10.1016/j.jbusres.2025.115629

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