Embedded Autonomy:Political Activities of Famous Private Firms in China

Business-government relations are critical for business survival and success in China due to the fact that government controls importance resources and the market supporting institutions(particularly rule of law) are insufficient.Employing evidence from in-depth interview and archival data on some famous private firms—including Lenovo,TCL,Vanke,Ufida,Mengniu,Geely,Wahaha,etc,this paper analyzes their political activities by examining a series of important questions relevant to most private firms in China: What kinds of political activities did the sampled private firms adopt? How do these activities respond and adapt to China's institutional environment? What is the proper distance between business and government? What is the relationship between political activities and market strategy? The paper has four parts.In the first part,the paper analyzes the institutional characteristics during China's transition by portraying Chinese government(officials) as a clear Janus-faced feature: on the one hand,government(officials) have strong developmental orientation because of administrative/fiscal decentralization reform and political incentives for promotion,while at the same time rent-seeking is prevalent.Such institutional characteristics affect the importance of business-government relations,and determine the corresponding political activities.That is,business political activities must meet the demand of officials' developmental orientation and their political performance concern,as well as addressing their rent-seeking need.The second part summarizes the main political activities these firms adopted and implemented,including political participation,political bonding,information and financial incentives by using the representative examples in each category.Political participation refers to attempts to join the current political organs,including people's congress(PC) or Chinese People's Political Consultative Conference(CPPCC).Political bonding refers to various political activities that meet the need of officials' political performance for career advance.Information strategy aims at providing information on the problems that the focal firm faced and seeking support from officials.Finally,financial incentives mean offering various kinds of financial or material services to officials.We also discuss the relationship and the combination of the various kinds of political activities.The third part discusses the proper distance that a firm should keep from government.We point out that a too close relationship with government(officials) may bring harms to firms including the negative impact upon firm economic autonomy and market capability,legal risk,etc.Meanwhile,a too far relationship with government also puts the focal firm in a disadvantaged position considering the government control of resources and accesses.Therefore,firms must cultivate good relationship with government(officials) while keeping certain distance from them.Using a theoretical concept,firms must maintain embedded autonomy,whereby embeddedness speaks to cooperative relationship,and autonomy denotes that firms must maintain autonomy in decision-making.The fourth part discusses the relationship between political activities and market strategy.Political activities must supplement firms' market strategy rather than substituting them.Only by focusing on market capability with political activities as complement,can firms gain sustainable and long term success.The paper contributes to a growing literature on business-government relations in China.It also has important theoretical implications on the interaction between organization and institutional environment.Particularly,it contributes to analyze how institutions matter.In addition,the paper provides practical guide for private firms.More importantly,the paper is original in the field in examining the fit between firm political activities and institutional environment,the appropriate distance between business and government,and the relationship of market and non-market strategies,which might generate future scholarly inquiry.