Political Relations、Diversification And Private Enterprises’ Performance

From the reform and opening up, private enterprises have experienced decades ofgrowing development of Chinese economy and gradually occupy an importantposition. Regardless of enterprises’ number, value, market retail sales, or the taxcontributions of employees, exports and foreign exchange, private enterprises havebecome an important economic and social development efforts. Vast majority ofprivate entrepreneurs’the goal is to keep the enterprise bigger and stronger, in theprocess, many private enterprises make use of capital operations, asset restructuring,mergers and other means to real expansion of estate, commercial, entertainment,financial services and other areas, and to Implement diversification strategy. Butdiversification is full of uncertainty, on the one hand it can spread the business risk,on the other hand it may be inefficient because of the configuration,besidescross-subsidies may also make companies in trouble.In addition, in our country, because the government make strict controls onaccess to the industry, there is a very high barriers to entry many industries.Manyindustries are monopolized by state-owned enterprises..In general, the state-ownedenterprises can benefit from government protection, but because of past long-termpolitical and ideological discrimination and other reasons, private enterprises’ survivaland development are affected in large part by political factors and their relationshipwith the local government. Private entrepreneurs usually take certain politicalstrategies to deal with government relations. It can avoid some risk, and may also getuseful information, grab scarce resources, get projects which face low risk but largeprofit. As a result,Private enterprises can avoid weaknesses in the competition,invincible. This paper studies three aspects: First, the impacts of private enterprises’political relationship on diversification. Second the effects of private enterprises ’diversification on performance. Third, the impacts of private enterprises’ politicalrelationship on diversified performance.This section summarizes the conclusions ofthe study,.Besides, for our present situation, it puts suggestions on establishingpolitical relations and diversification of the corresponding countermeasures forprivate enterprises. This paper concludes that:First, private enterprise diversification negatively correlated with performance.Second, the political relations of private enterprise can help improve theperformance of its diversification.Third, the political relationship can help improve private enterprises’ performance of diversified.