Can a Stone Kill Two Birds? The Effects of Political Relationships on Supply Chain for New Ventures

Abstract

While research has established the importance of cultivating political relationship for businesses, how this affects new business ventures is less explored. Given the heightened resource constraints entrepreneurial firms face, does building government relationship help them in their critical tasks to ensure survival? We draw upon the resource dependence theory to develop arguments on how political relationships influence new ventures’ abilities to obtain stable suppliers and buyers. By enhancing their access to resources and reducing uncertainties, government relationships can help new ventures to attract more suppliers. However, by providing an alternative source of dependence, government relationships make new ventures depend less on buyers and can reduce the number of buyers. These opposing effects are further moderated for new ventures that differ in their access to resources. We test our arguments in the context of entrepreneurial firms in China’s transitional market, using a survey of 345 new ventur...