Too much reciprocity? The invisible impact of home political connections on the value creation of Chinese multinationals

Abstract

Purpose

Using the evidence of Chinese outbound mergers and acquisitions (M&As) enacted between 2006 and 2014, this study aims to investigate the role played by home political connections on the cost implications of Chinese multinationals. It also examines whether home political connections – at different levels and of different configurations – impact the operational cost of Chinese multinationals.

Design/methodology/approach

The data were analysed using a multivariate regression model. To examine their heterogeneous effect on Chinese multinationals, the political connection data were further split into higher and lower level political connections and in chief executive officer (CEO) and chairperson political connections.

Findings

This study implies the negative effect of home political connections on the internationalisation of Chinese multinationals. At the same time, the impact of lower-level political connections is stronger than that of their higher-level counterparts. Moreover, CEO political connections have a stronger effect on the operational costs of Chinese multinationals than their Chairperson equivalents.

Originality/value

By unravelling the “black box” of Chinese internationalisation from the social exchange perspective, through the informal political connection networking ties between Chinese firms and the government, this study advances emerging market multinational theory, contributes to the understanding of the heterogeneous nature of political connections and sheds new light on social exchange theory from the perspective of the emerging phenomenon of Chinese internationalisation.

Citation

Sun, Z. and Ai, Q. (2020), "Too much reciprocity? The invisible impact of home political connections on the value creation of Chinese multinationals", Chinese Management Studies, Vol. 14 No. 2, pp. 473-491. https://doi.org/10.1108/CMS-12-2018-0788