Research On The Influence Of Political Connection On Private Enterprises Investment Preferences

In recent years,the private enterprises develop rapidly and play an important role in the national economy with the aid of reform and opening-up. While because China has not yet formed a completely free market economic system and the government still holds the right of resources allocation and approval, the private enterprises at the bottom of the political system are often treated unfairly in the market competition and the access to resources, which lead to the growth of enterprises still face serious obstacles. In this case private enterprises are trying to establish close contact with government for scarce resources to breakthrough the development bottleneck. Out of self-interest mechanism government will intervene in corporate governance and investment decision by the way of resources allocation, Therefore under the government intervention enterprises are easy to form investment preferences.Based on the background, the paper starts from the theoretical basis of the supporting hand and grabbing hand, analyzes the political connection incentive effect on enterprise scale investment and R&D investment from the aspects of the political promotion and power rent-seeking, and establish the mathematical model on the basis of C-D production function for further discussion. While the results show that the political connection can bring various resources, it will not necessarily promote enterprises investment.The effect will changes along with the political association degree, therefore the influence of political connection on enterprise investment preferences is non monotonic. That means political connection has a promoting effect on scale investment and R&D investment in In a reasonable range; when beyond the scope of reasonable rang, political connection has a promoting effect on the scale investment and a weakening effect on R&D investment; when it get to a high degree, enterprises only pay attention to the government relationship and political connection will weaken both the scale investment and the R&D investment.In the empirical analysis, we use a total of 2205 private enterprises micro sample from 2010 to 2013 for the research. The results show that the vast majority of enterprise with political connection weaked the R&D investment, but promoted the scale investment and the endogenous relationship between enterprise scale investment and political connection will strengthene the promotion.Through the classification regression we find that the effect of political connection on enterprises investment preferences will be affected by the factors of institutional environment and the level of technology, namely in the high technology industry and the registration area with a higher degree of marketization, the political connection has a promoting effect on scale investment and R&D investment. While in the traditional industry and the registration area with a lower degree of marketization political connection has a promoting effect on the scale investment and a weakening effect on R&D investmentFinally,based on theoretical and empirical analysis, the paper puts forward with corresponding suggestions.to private enterprises and government.First, private enterprises should seriously measure the costs and benefits of the political connection establish, at the same time they should strengthen the self-construction and innovation ability; Second,the government should establish scientific achievements appraisal mechanism, develop the private economy and accelerate the establishment of a mechanism innovation.