abstract this empirical paper studies corporate political activities in chinese transitional environment. the research results show that 1) corporate political activities widely exist in china; 2) firms can develop and implement eight types of political strategies in china; 3) there is a high level of similarity, as well as significant differences between political activities of firms in chinese environment and western environment.
key words corporate political strategy, government policy, chinese transitional environment
1 introduction
in developed countries with market economy, the issues of public policies and rules, which influence business activities, have always been concerned by business organizations (shaffer, 1995). firms not only comply with government policies and regulations, but also influence the government decision-making process actively in many aspects, in order to create a favorable business environment for them (zhang weiying, 2001; hillman and hill, 1999). the later is called corporate political activities, which have been studied extensively in past twenty years (such as, davis,1998; getz,1993; hillman and hitt, 1999; keim,1981; sethi,1982; etc.). for example, getz (1993) identified seven tactics of corporate political actions (cpa), including lobbying, reporting researching results, reporting survey results, testimony, legal actions, private services and constituency building. davis (1998) focused on ceo testimony and direct lobbying, and found out that most of firms affected the government policy through lobbying, communication and electoral contribution.
china is still in a transition period from planned economy to market economy, and the government’s influences over firms remains not only at macro level by means of the policy and regulation, but also at the microcosmic level by means of direct intervention. at the same time, business sectors (including public firms and private firms) exert enormous influences on government decision-making and resource allocation process, and such phenomenon in china is more common than that in the west (chen huaiyuan, 2000). although the above-mentioned political activities of chinese firms exist to a large extent, they are not well studied academically.
this paper takes chinese firms as its study objects and studies the characteristics of corporate political activities in the course of chinese economic transition. in the section follows, we first introduce research questions and research methodology, and then in section three, we analyze the research results obtained through questionnaire survey by categorizing corporate political strategies, and exploring the extent of their usage by means of factor analysis. in section four, we discuss the research results by relating them with the research findings in existing literature, and finally in section five, we summarize our study and discuss the implications of our research findings.
2 research methodology
2.1 research questions
we define corporate political strategy as the strategy that firms employ to influence the formulation and implementation process of government policy and regulation in order to create a favorable external environment for their business activities (getz,1993; zhilong tian, yongqiang gao & wei wu, 2003). based on discussions in the introduction section, we study following two questions in detail: (1) what kind of political strategies do firms in china adopt and what is the extent of their usage? (2) what might be the similarity and differences in political strategies between firms in chinese environment and western environment?
2.2 sample and data
the pilot study spanned from april to june 2003, during which 20 emba students with the working experience exceeding eight years were interviewed. before the interviewing, we designed an outline to guide the discussion based on the existing literature of political strategy (davis, 1998; getz, 1993, 1997; yoffie, 1987; hillman and keim, 1995; hillman and hitt, 1999; keim, 1981; sethi, 1982; rehbein & schuler, 1995; etc.). following this, a multi-dimensional questionnaire comprising 39 variables (marked as q1 to q39 in table 1) was drawn up: likert scale was used to measure the responses and it ranged from 1 (very low) to 5 (very high).
the questionnaire was then used in a survey from january to may 2004 and involved emba and mba students of huazhong university of science and technology. these students typically hold top managerial positions at subsidiary level or above from firms in hubei, henan, guangdong, and fujian provinces. a total of 350 questionnaires were distributed, and 233 were returned. eliminating the invalid questionnaires, we obtained 201 valid questionnaires, giving us a response rate of 57.43 per cent. these valid responses come from soes (51.24%), stated owned holding firms (12.44%), stock firms (16.42%), foreign invested firms (6.47%), private firms (13.43%)[1].
2.3 validity and reliability
we analyzed the reliability and validity of questionnaire following closely suggestions by churchill (1979) that the corrected item total correlation (citc) should not be smaller than 0.5 and peterson (1994) that cronbach’s alpha should not be smaller than 0.7. next the construct validity of questionnaire was tested by means of the principal components analysis. the results of the analysis showed the reliability and validity met the requirement of having kmo (kaiser-meyer-olkin) value greater than 0.5. due to the limitation of paper, the process of reliability and validity analysis is not explained in detail.
3 research results
in this part, we firstly classified the variables that composed corporate political strategy by factor analysis, then analyzed the extent of strategy usage by the “means” of responses for each variable. corporate political strategies (cps) were classified into eight types and each type of political strategy consisted of a number of political tactics or actions, referring to table 1. among them, the factor of “government involvement strategies” explained 14.581% of the variance in the cps variables, while the other factors of “direct participation strategies”, “government association strategies”, “financial incentive strategies”, “prolocutor strategies”, “institution innovation strategies”, “information consultation strategies” and “societal force mobilization strategies” are basically lower than 11 percent. the loadings of all the variables with the exception of q2, q33, q16 and q15 are higher 0.5. the factors concerning political strategies explain the 66.753 percent of total variance, reflecting the level of the usage of political strategies of chinese firms. in addition, α coefficients of those factors are also higher than 0.7 through reliability analysis. in our analysis we classify the extent of usage of each tactics into three categories, such as “low (mean<2)”, “moderate (2≤mean<3)”, “high (mean≥3)” according to the mean value in table 1.
3.1 government involvement strategies in chinese transitional environment
the first type is government involvement strategy that includes seven political tactics. inviting the government officials to attend firms’ important occasions (q27), inviting government officials, congressmen to visit the firm (q28), publicly promoting the guidelines and policies of the communist party and governments (q29), reporting the work to government officials (q30) are regarded more often used in their firms by respondents, while asking government officials to give opinions in policy discussions organized by trade associations (q9), asking for instructions from government officials about firm’s important issues (q26) and visiting the government officials regularly (q31) are regarded moderately used. this indicates that government involvement strategies are used quite often, and there are several reasons for firms in china to do so. 1) for soes, government officials are the representatives of state ownership and they must be consulted for any important issues of the firms; 2) government officials are regarded as the persons symbolic for social status and ranking, and the involvement of government officials (especially from high level) will usually add to the legitimacy and reputation of the firms. for example, in the reception halls of many firms, it is very popular that enlarged photos of government officials visiting the firm or the good words from government officials are hanging on the wall.
table 1 corporate political strategies in chinese transitional environment
type of pspolitical tacticsmeanstd deviationfactor loadingαcharacteristic value% of variance
government involvement
strategiesq303.25871.0662.8100.891516.06914.581
q273.53851.0862.775
q293.23083.2308.739
q262.89511.2374.738
q92.37761.1057.686
q312.72031.0029.641
q283.54551.0530.537
direct participation
strategiesq41.97901.2917.7390.79762.84010.888
q63.71331.0917.719
q82.12591.1860.642
q5, 2.58041.1653.594
q73.22383.4076.539
q31.78321.2455.516
q13.04901.4886.507
q23.14691.2274.490
government association strategiesq252.72031.1653.7000.83472.25610.493
q222.97201.1129.672
q213.40561.3228.656
q232.42661.1289.607
q243.59441.2232.547
financial incentive strategiesq341.97201.0545.7540.84771.8029.766
q371.7762.9817.620
q392.91611.1037.588
q323.12591.0606.582
q382.69931.0814.554
q362.64341.1032.521
q352.09791.0636.520
q332.24481.0293.479
prolocutor
strategiesq112.8951.9766.8670.86491.6928.206
q122.78321.0150.795
q103.18181.0115.655
institution innovation
strategiesq192.42661.1037.6940.81051.5126.654
q202.12591.0269.681
information consultation
strategiesq142.6151.9513.6870.84861.1206.164
q132.8042.9877.532
q163.32171.0851.488
q153.37061.0726.477
societal force mobilization strategiesq182.87411.0131.9530.75061.0445.903
q172.71331.0456.940
3.2 direct participation strategies in chinese transitional environment
the second type is direct participation strategy that includes eight political tactics, in which firms actively seek chances to take part in the process of government policy decision-making. the most used tactics include firm’s employees being elected as congressman or member of cppcc at various levels to participate in or discuss the political affairs (q1, q2), firm’s employees being elected as the committeeman of communist party at various levels (q6), participating in trade associations to propose the industrial standards or regulations suggestions (q7). moderately used tactics include firm’s employees being the officials of trade associations (q5) and participating in the formulation of policies and laws (q8). however, being the consultants or committeeman of public affairs for governments (q3) and being directly the government officials (q4) are much less used, as such chances are very rare. this result indicates the situation of china’s political structure that a percentage of congressmen and members of cppcc come from business sectors. the titles, such as congressmen, do provide firms chances to voice their opinions, and symbols to protect their firms. a related research of this paper’s author indicates that 60% of issues raised by business congressmen were related to promotion of the interests related to their firms.
3.3 government association strategies in chinese transitional environment
the third type is government association strategy that includes five political tactics, in which firms try to associate their activities with government’s objectives. being a firm that government has a pride in and relies on (q21), doing the things that are suitable for political environment (q24) are mostly used. doing the things that the government encourages (q22) and recommends (q23) and making the investments that are helpful to enhance government political performance (q25) are moderately used. why firms in china like to associate their activities with government? a major reason is that chinese government at all levels has faced in past twenty years and will face in next twenty years great task to lead china to a stable and wealthy country, but the capability of government is limited. thus it is popular that doing what government encourages to do is a very wise way for firms to gain government supports.
3.4 financial incentive strategies in chinese transitional environment
the fourth type is financial incentive strategy that includes eight political tactics. providing the financial support for all kinds of government initiated activities (most of them in the name of promoting local business and social welfare) (q32) is most often used. donating for programs in education, sports, health care and relieve people from disasters (q33), financially supporting advertisement for commonweal projects (q35), giving gifts to government officials (q36), influencing government officials through money (q38) and providing private services to government officials (q39) are moderately used. however, paying government officials for their business related traveling (q34) and asking government officials attending reception banquets and seminars (q37) are rarely used. the results indicate that the financial contribution has two destinations: one is to government sponsored activities publicly, such as exhibition of local products, charitable fund raising; and the other is to government officials privately. readers can easily relate the later to the publicly known corruption existing in china. the research result reflects the existence of corruption. an analyst commented that there is a difference between the north and southern parts. the government officials in southern provinces set many programs which attract businessman to invest and help businessmen make money, and then receive something as return. while some government officials in northern provinces ask for money from firms directly[2].
3.5 financial incentive strategies in chinese transitional environment
the fifth type is prolocutor strategy that includes three political tactics. the most used tactic is looking for familiar government officials directly and expecting them to speak for firms (q10). while looking for the government officials through the government official’s family, townee, classmate, friend, and expecting them to speak for firms (q11), and looking for the non-government officials who participate in policy making-decision, expecting them speak for firms (q12) are moderately used. this indicates that looking for prolocutors is a common used strategy in china.
3.6 institution innovation strategies in chinese transitional environment
the sixth type is institutional innovation strategy, which includes two tactics. the first is that through their own efforts, firms find the shortcoming of existing institutions, practicing and promoting the adoption of new institution rules which represent the direction of government policy and regulation change (q19). the second is that firms enter into uncovered fields of existing institutions, arousing debate and discussion about new institutions and establishing the new institutional logics favorable for the firms finally (q20). these two tactics are moderately used. this result reflects the real situation in china. china’s transition from planned economy to market economy has presented and will present lot of opportunities for institutional changes, among which, a large percentage are initiated by business organizations to seek business opportunities. for example, the debate over the eliminating tax preferential law for foreign invested firms initiated by domestic firms, the issuing of direct marketing law promoted by foreign firms in china, such as avon and anway.
3.7 information consultation strategies in chinese transitional environment
the seventh type is information consultation strategy, which includes four political tactics. the most used is the active inquiry of the government policies and regulations relevant to the firms (q15, q16). the moderately used is putting forward the research report aiming at relevant problems such as the formulation and implementation of policy and rules from their own or industry angle, and sending them to relevant government department and industry organization by formal or informal way, thus to exert an influence (q13, q14). this indicate that firms in china keep the communication channel with government officials quite fluent in order to get the information from and sending the suggestion to policy-makers.
3.8 societal force mobilization strategies in chinese transitional environment
the eighth type is societal force mobilization strategy, which includes two tactics. they are arousing public attention from the media, consumers’ colony, stockholder or others, to form certain orientation of public opinion, and influencing government and industry decision-making actions indirectly (q17, q18), and these two tactics are moderately used. this indicates a fact that firms in china are able to make use of public opinions to exert influences on government policies. such examples are many. for example, some private firms successfully get into china’s auto-making industry to make sedan, by appealing to public sympathy for a fair treatment of private investment.
in this section, we should pay special attention to following two points. firstly, the most often used political strategies by chinese firms are government involvement strategy, government association strategy, and direct participation strategy. the most often used political tactics in other strategies are “providing financial support for governments’ activities” in financial incentive strategy, “looking for familiar government officials directly and expecting them to speak for firms” in prolocutor strategy and “active inquiry of governments’ policies and regulations” in information consultation strategy. secondly, it is obvious that, these strategies are related and are used by firms jointly in order to get any positive results, and only one single strategy may not usually work.
4 further discussions
this part of our paper will further discuss the research findings introduced in previous sections and the characteristics of political strategies of firms in china by relating them to the studies of existing literatures. there are a large amount of research literatures about corporate political actions and strategies in the west (davis,1998; getz,1993; hillman,1995; hillman & hitt, 1999; keim,1981; sethi,1982). getz（1993）identified seven tactics of cpa which are lobbying, reporting research results, reporting survey results, testimony, legal actions, personal service, and constituency building. hillman and hitt (1999) divided corporate political strategies into three categories: information strategy, financial incentive strategy and constituency building strategy. and they enumerated a large number of political tactics or activities, such as lobbying, reporting research results, testifying as expert witnesses, supplying position papers or technical reports, contributions to politicians or party, honoraria for speaking, paid travel, personal service, grassroots mobilization, advocacy advertising, public relations, press conferences and political education programs, etc. just as berman (1980) reviewed, literature on cps concentrated on business’s influence to legislative process by lobbying and campaign contributions. through the comparison with western corporation political actions and strategies, we find that there is a high level of similarity, as well as big differences, between chinese corporation political actions and western corporation political actions.
as to government involvement strategies and government association strategies, they are used mainly by firms in china. except for “inviting government officials to attend important occasions” and “calling on government officials frequently”, firms in western environment seldom use other political tactics in these two political strategies identified in our paper.
for direct participation strategy, chinese firms can take part in policy decisions through elected as congressman, or voice firm’s opinions on important government policies through elected as members of cppcc. furthermore, most leaders of large soes are appointed by the government at present, and can participate in government decisions directly. these aspects are exclusive to chinese situation and have no similarity in the west. as to the other direct participation tactics, such as firm’s employees acting as consultants for government, or through trade association, or acting as professionals for some policy issue, common phenomena exist in both china and the west.
for financial incentive strategy, there is one important difference between firms in china and in the west. firms in the west can impact government decision-makers through campaign contributions and pac donations, while it does not exist in china, as china has a one party dominated political structure.
as to prolocutor strategy, the consisting political tactics are almost the same between firms in china and in the west. the difference only lies in that political agencies are well developed in the west, and firms can hire professional lobbyists to act as prolocutors and lobby for them. while in china, the political agencies are under-developed. there are even no political agencies openly run in china, but there are still phenomena that some firms use other organization’s help to apply for governmental projects or build relations with government officials. the response from managers in our interviews indicates that, some offices of firms stationed in beijing and capitals of provinces may evolve into quasi-political agencies.
for institution innovation strategy, there is no big difference between firms in china and in the west. but in the period of transition, chinese firms have more chances to use institution innovation strategies to promote the evolution of regulation rules and policies and to gain benefits in the process than firms in the west.
as to information consultation strategy, there are no major differences between firms in china and in the west. both chinese and western firms can put forward opinions and suggestions from the viewpoint of firms or industries to government legislation and enforcement activities that will influence these firms or their industries. but western firms can also impact government decisions by reporting survey result of public opinion and provide testimony on some legislation. such phenomenon has not been found in china.
as to social forces mobilization strategy, some differences exist. although firms in both china and the west can impact government decisions by mobilizing forces as social media, shareholders and other stakeholders, there are differences on manners and degrees. it is almost impossible for chinese firms to mobilize the force of media, and neither they can bring pressure to bear on government decision-makers through mobilizing other social forces. while western firms can do so. western firms can mobilize shareholders and employees to put pressures on government decision-makers. further, they can affect the orientation of the public voice through impacting the medias firstly. they even can employ the force of federal court to protect their interests.
5 conclusions
china’s transition from a planned economy to a market economy with socialist characteristic provides chinese domestic firms and transnational firms operating in china a complicated, dynamic and uncertain institutional environment. though governments’ intervention role into firms business affaire has already been weakened under socialist market economy, there are still a certain gap in such respects as the market development, regulations and rules between a developing market environment in china and the ripe market economic environment in the west, and the government still intervenes into enterprises in many aspects. from this perspective, it shows the importance of the influence of corporate political strategy on government policy, when enterprises maintain the relationship with the government. therefore, this paper studies the characteristics of corporate political strategies in chinese business environment. all these are consistent with strategy management theory. our research findings are helpful for academics and business practitioner to understand the nature of political strategies of chinese firms. the results of our research are summarized below.
eight types of corporate political strategies are identified and they are named government involvement strategy, direct participation strategy, government association strategy, financial incentive strategy, prolocutor strategy, institution innovation strategy, information consultation strategy and social power mobilization strategy, according to the nature of consisting political tactics (refer to table 1) in each type of strategy. among them, the most used strategies are direct participation, prolocutor, government involvement, and government association strategy, while financial incentive, information consultation, social power mobilization and institution innovation strategy are used relatively less. in theory, the results of this paper are consistent and supportive to previous research on corporate political actions, and also expand our understanding on the nature of corporate political strategies in a transitional business environment like china. our studies are also helpful for top managers to realize what proper political strategies they may adopt. of course our research has its shortcomings. this paper only identifies the characteristics of chinese firms’ political activities by the scale. even with above limitation, this paper provides readers with a better understanding of the political activities in chinese environment.
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[1].we tried to analyze the differences of responses from firms with different nature of ownership, but we only found that significant differences exist in only 7 among the 39 variables. due to the limitation of the paper, we omitted the related analysis, but this omission does not affect the quality of our paper.
[2].the daily of south city, 2004-10-11
