Wednesday, November 4, 2020 | 2:00pm - 3:30pm | ZOOM, Room 335

Abstract

We develop a political path dependence model to integrate the network embeddedness perspective and the literature on corporate political strategy in order to determine how firms adapt their political connections when anticorruption efforts lead to the turnover of government officials. Firms that have close connections with ousted corrupt officials have stronger motivations to both remove existing political connections (“cleaning the house”), and to develop new connections with their successors (“hosting new guests”). Their political path dependence enables them to do the former, but constrains them from doing the latter. These effects are magnified when firms are highly dependent on the government, and when the ousted corrupt officials have great political power. Evidence from anticorruption campaigns in China between 2012 and 2017 strongly supports our theoretical predictions.