Impact of political, guanxi ties on corporate value: Evidence from the technology-intensive firms in China

Abstract

Purpose

Guanxi is an influential factor of doing business in China. This research focuses on a specific guanxi type, political connection and studies the impact of political connection on corporate value. Moreover, in the technology innovation studies, few studies have examined the impact of politics on technology innovation of firm. This paper aims to examine the relations among political connection, technology innovation and corporate value by an empirical study.

Design/methodology/approach

A sample of listed technology-intensive firms in China is used. This research examines the impact of political connection and technology innovation on corporate value with two dimensions, namely, the owner type of firm and the political connection level of firm.

Findings

Based on an empirical study, this research has four main findings. First, technology innovation has positive impact on corporate value. Second, compared to non-connected firms, politically connected firms value more. Third, political connection to a government of higher administrative level contributes more to corporate value. Finally, the relations among political connection, technology innovation and corporate value differ by the owner type of firm.

Originality/value

This research contributes to the study of guanxi by considering the specific guanxi type, political connection, as well as to the study of technology innovation by considering the impact of politics.

Citation

Shi, Y. and Cheng, M. (2016), "Impact of political, guanxi ties on corporate value: Evidence from the technology-intensive firms in China", Chinese Management Studies, Vol. 10 No. 2, pp. 242-255. https://doi.org/10.1108/CMS-07-2015-0153