Kesearch On The Effect Of Political Connection On Enterprise Performance In Small And Medium-sized Enterprises

Due to system environment’s construction is relatively backward during the transition period, the political connection phenomenon are common in small and medium-sized enterprises of our country. How does the political connection influence the small and medium-sized enterprises’performance also becomes new hotspot of the enterprise growth theory. Currently there are two theory explanation about the performance of the political connection phenomenon:"efficiency hypothesis" and "rent-seeking hypothesis"."Efficiency hypothesis" points out that political connection in the enterprise is not only a enterprise’s social capital, but also a "signal" showing the enterprise has good development prospect and social reputation, so small and medium-sized enterprises that having political connection are more likely to gain favorable resources than small and medium-sized enterprises which are without political connection, these resources are efficient for improving the enterprise’s production and performance."Rent-seeking hypothesis" argues the reason that small and medium-sized enterprises establish political connection may be rent-seeking for the government or government officials that master the distribution of resources, but this will pay a heavy unproductive rent-seeking costs and will produce adverse impact to the scarce resources effective distribution and the small and medium-sized enterprises’performance of the whole society. So, whether the establishment of political connection plays a positive or negative role in the small and medium-sized enterprises’performance needs to be further inspected.This paper in this paper discusses political connection’s effect and mechanism on to the performance of the small and medium-sized enterprises, using China’s214small and medium-sized listed company from2007to2010as the sample. First of all, this paper did a domestic and foreign relevant literature review, and then analysed and explained "efficiency hypothesis" and "rent-seeking hypothesis" for small and medium-sized enterprises’political connection using the social capital theory and rent-seeking theory separately; Then using panel data in random effects regression analysis, this paper constructed three basic model respectively to test "efficiency hypothesis","rent-seeking hypothesis," and the regulating action of the institutional environment and the characteristics of the enterprise for the performance effect of the small and medium-sized enterprises’political connection; Finally, based on the theoretical and empirical analysis results, this paper put forward countermeasures concerning improving performance and optimizing system environment of the small and medium-sized enterprises. The innovation point of this paper is that using political connection index to measure the strength of enterprises’political connection, to discuss the political connection’s influence of the small and medium-sized enterprises’performance, and to reveal the adjusting mechanism of the institutional environment and the characteristics for the effect of the small and medium-sized enterprises’political connection.This paper’s main conclusions are as follows:(1) The correlation between the small and medium-sized enterprises’political connection and the enterprises’ performance is significant negative, which supports the "rent-seeking hypothesis" and does not support "efficiency hypothesis" about the small and medium-sized enterprises’ political connection. That is the small and medium-sized enterprises capture the local government officials who control the distribution of social resources by establishing political connection with the government, but unproductive rent-seeking cost increase the burden of enterprises, so as to produce unfavorable effects on enterprises’performance.(2) The system environment has played an important regulatory role for the effect of political connection on the small and medium-sized enterprises’performance. Government meddling in the economy is more high, legal system level and market process is lower, the negative influence of political connection on the small and medium-sized enterprises’performance is larger.(3) There was significant difference between the political connection’s effect on the performance of the small and medium-sized private enterprises and state-owned enterprise, compare with state-owned small and medium-sized listed companies, the negative influence is bigger on the private small and medium-sized listed companies.