The Analysis Of The Relationship Between Private Enterprises’Political Connections And Diversification Strategy Based On The Resource Dependence Perspective

Under the big picture of China’s economic transition, The relationship between government and business is the problem that we must grasp, and how to study the behavior of corporate management from the external environment is an issue that we urgently need to study. This paper treat the relationship between political connections and diversification strategy as the research perspective, the private listed enterprises in China as the research object, specifically investigate:(1) the relationship between private enterprises’ political connections and the implementation of enterprises diversification strategy;(2) the relationship between private enterprises’political connections and the implementation of enterprises regional diversification strategy. This paper aims to study on China’s private enterprises, on the macro level to form research findings about political influence on private enterprise diversification strategy. to provide a certain reference for China’s private enterprises to grasp the relationship between business and government.This paper treated the Hefindahl Index as the proxy indicator to measure the corporate diversification strategy, the proportion of the number of directors with the political background to the total number of directors as a measure of the degree of political connection, and firm size, growth rate, asset-liability ratio and fixed asset coverage as the primary control variable, used three consecutive years of panel data to conduct quantitative and qualitative analysis of the relationship between private enterprises political connections and diversification strategy. The main contents of this paper includes the following sections:(1) The first part is an introduction, treat the current domestic and international situation facing China’s private enterprises as the background, mainly describe the research background and significance of private enterprise political connections and private enterprise diversification strategy. In order to better grasp the contents of this article, the author briefly discussed private enterprises, political connections, and the diversification strategy in the introduction part. The second part of this paper is the literature review, which gives a review about the relationship between corporate diversification strategy and political links based on the two aspects of theoretical motivation under corporate diversification strategy and the influence on corporate behavior from corporate political connections, and gives brief comments on these two research object. Through literature review and comment on the related literature, the writer found a research perspective and theoretical basis of this article, laid the foundation for later formulation. The third part is the hypothesis of this paper, to distinguish between resource-based theory and resource dependence theory, the author gives a brief comparison of the two theory, and extract the resource dependence theory as the theoretical basis for this article,; next, the author uses the resource dependence theory as the theoretical support, treats industry and geography as the two dimensions, comes up the two hypotheses of this article, The fourth part is the empirical part of the paper, refer to some scholars’model of the relationship between diversification and political connections, and presents research model of this paper, verifies the hypothesis of this paper. The fifth part is the conclusion of this article, Through summarizing the empirical results, the author presented conclusions of this study, and made the limitations of this article and future research directions.Through empirical research, the author draw the following conclusions:(1) Political connections help private enterprise to implement diversification strategy;(2) Private enterprises with active political connections with government departments or government staff can help private enterprises to break the geographical restrictions, enter into other areas, and achieve diversification. In order to better guide private enterprises to grasp the relationship between business and government, give the following policy recommendations of this paper,(1) Government should reduce the degree of intervention in the economy, and improve market competition system;(2) The enterprise shall establish "efficient, stable and harmonious" political connections with government;(3) Broaden the financing channels for enterprises, improve the financial system.The main contributions and deficiencies of this paper:1.Because "natural political connections" between the state-owned enterprises and government, this paper treat China’s private enterprises as it’s object, the resource dependence theory as the theoretical support, focus on private enterprise’ political connections to the impact of the implementation of the diversification strategy;2. Aspects of the study sample. First, in selecting private listed companies data, there are no comparison about the nature before and after the company that go public, and didn’t exclude the sample data of those company that became listed by means of merger or MBO; second, the number of samples in panel data is small, these factors may affect the accuracy of the conclusions of this study.3. This paper only study the effects of political connections on corporate diversification strategy, without empirical research about the relationship between diversification strategy,political connection and corporate performance.