A Double-Edged Sword: The Two Faces of Political Connections in International Investments of Chinese Firms

Political connections have been tested for correlation with outward foreign direct investment (OFDI). Both theoretical rationale and research evidence are mixed. To advance this debate, we conceptualize political connections as a dual-dimensional construct and hypothesize the differential effects of the breadth and the depth of political connections on OFDI. Employing a sample of 2,374 Chinese listed firms, encompassing 15,647 firm-year observations from 2008 to 2016, we find evidence supporting our hypotheses: (1) the breadth of political connections reduces the likelihood of a firm engaging in OFDI and (2) greater depth of political connections increases the likelihood of a firm engaging in the OFDI. Thus, we advise firms to exercise caution when adopting corporate political strategies for internationalization in general and OFDI in particular.

摘要

现有文献已讨论过政商关系与对外直接投资（OFDI）的相关性，但理论依据和研究证据尚不一致。 为推进对这一议题的深步探讨，我们将政商关系视为一个双维度的概念，并讨论政商关系的广度和 它的深度对 OFDI 的不同影响。我们通过对 2008 年至 2016 年间 2374 家中国上市公司、 15647 个公 司年度观察值的样本进行分析，发现了支持假设的证据：（1）政商关系的广度降低公司实行 OFDI 的可能性；（2）政商关系的深度增高公司实行 OFDI 的可能性。鉴于政商关系不同维度的不同影 响，我们建议企业在国际化，特别是对外投资方面，应谨慎施行政商战略。