Political Connection,Entrepreneurship And Performance Of Private Enterprises

Since the Reform and Opening Policy,China’s private enterprises have achieved unprecedented development in last 40 years.In the sense of the economic status,the role of private enterprises has been recognized.China’s economic system has changed from a single state-controlled economy to a multi-ownership economy.In terms of economic contribution,the wealth creation ability of the private enterprises,the absorption capacity of the employed population,and the social assistance ability have been widely recognized by the whole society.As an emerging economic group,Chinese private enterprises maintain a very close political relationship with the government while achieving great economic achievements.Compared with western developed countries,the political connections of Chinese private enterprises are characterized byuniversality.What kind of impact will the political connection of Chinese private enterprises have on the business performance of private enterprises? Can the political connection of private enterprises really improve the market competitiveness of private enterprises and thus improve their performance?The research of this paper will show that entrepreneurship is the intermediate bridge between the relationship of private enterprises’ political connection and their performance.This provides a new perspective for studying the relationship between political associations and corporate performance of private enterprises.Through theoretical analysis,theoretical model derivation and empirical test,this paper focuses on the following questions: First,what impact does the political connection of private enterprises have on the entrepreneurship of private enterprises? Second,how does the entrepreneurship of private enterprises affect the performance of private enterprises? Third,what is the influence mechanism of political association,entrepreneurship and performance of private enterprises? How does the political connection of private enterprises affect the entrepreneurship and ultimately affect the business performance of the enterprises? Fourth,what is the impact of the external institutional environment of private enterprises on the relationship between private enterprises’ political connections and performance?On the theoretical level,this paper first explains the impact ofpolitical connection of private enterprises on entrepreneurship by constructing theoretical models.The working hours of entrepreneurs are divided into productive working hours and non-productive working hours.The length of productive working hours can be used to indicate the extent of entrepreneurship.The theoretical model derivation of this paper initially reflects that the political connection of private enterprises will significantly reduce the productive working hours of entrepreneurs,thus hindering private entrepreneurs to better exert their entrepreneurship.Secondly,based on the existing research literatures on entrepreneurial theory,political connection,and corporate performance,this paper illustrates from a theoretical point of view that the entrepreneurship will significantly improve the business performance of private enterprises;entrepreneurship plays an intermediary role in the relationship of political connection and corporate performance;the external institutional environment of private enterprises will have an great impact on the relationship between private enterprises’ political connections and their performance.On the empirical level,this paper uses the data from the CSMAR survey database to analyze the relationship of political connection,entrepreneurship and corporate performance of private enterprises.This paper uses the number of patent applications of private enterprises to measure their entrepreneurship,and uses the political background ofcorporate executives to measure the political relevance of private enterprises.The empirical results of this paper reveal: First,the political connection of private enterprises greatly hinders entrepreneurship of private enterprises.The deeper the political connection,the more difficult it is for private entrepreneurs to exert entrepreneurship.Second,entrepreneurship can greatly enhance the performance of private enterprises.If private entrepreneurs can better exert their entrepreneurship,and their business performance will be significantly improved.Third,entrepreneurship plays an intermediary role in the relationship between private enterprises’ political connection and their performance.Fourth,the external institutional environment of private enterprises will have a significant impact on the relationship of political connections and corporate performance.Free political environment,well-functioning market and great business culture will offset some negative impact of political connections on business performance.The theoretical analysis and empirical research conclusions of this paper agree that the political connection of private enterprises will hinder private entrepreneurs from exerting entrepreneurship,and thus inhibit the improvement of private enterprises’ performance.Therefore,in order for private enterprises to continue to play a great economic role,the government needs to relax restrictions and control over private enterprises,provide a free and relaxed development environment forprivate enterprises,thus reduce the motivation of private enterprises to build political connections.At the same time,entrepreneurs themselves must also establish the sense of being independent and competitive.They must grab opportunities through market competition rather than political means,then they will promote China’s economic development in the long run as a whole.