Party Branch Embeddedness, Official Promotion and Employment Protection: Empirical Evidence from a Survey of Chinese Private Firms

Abstract

Coordinating labor conflicts and stabilizing employment relations have always been an important governance goal pursued by governments at all levels. Especially at the present time when China is in the throes of economic growth shift and industrial restructuring, the employment contradiction is more complex, and it is also a high incidence stage of labor conflicts and deep-seated social contradictions. In recent years, mass incidents caused by conflicts between labor and capital have occurred frequently, which have caused major impacts on the normal production order of firms and social stability. As the main participants in social and economic activities, private firms are an important carrier for creating employment opportunities and realizing employee security, and thus their decisions in employment protection are particularly worthy of attention.Employment protection is the micro-foundation to mitigate labor conflicts and achieve regional employment stability. Using the survey data gathered from private firm in China, this paper examines the impact and mechanism of Party branch embeddedness on employment protection. Empirical results show that Party branch construction is conducive to enhancing employment protection. Specifically, when private firms build up Party branches or when entrepreneurs take the position of （vice） secretary, firms increase the proportion of long-term employees and reduce the proportion of short-term and temporary employees significantly. Moreover, when firms are located in regions with higher official promotion incentives and more serious unemployment rate, and located at the low end of the industrial chain （labor-intensive）, the impact of Party branches on employment protection is more pronounced. This suggests that the reason why Party branch embeddedness improves employment protection may be that it provides a formal organizational channel for government officials to transmit regional social stability pressures to firms, so as to eliminate potential labor conflicts and hidden dangers of official promotion. We further find that Party branch embeddedness improves employment protection through the mediate path of enhancing employees’ collective voice ability.This study makes the following contributions: First, it enriches the literature in the field of employment protection. Different from previous studies focusing on government regulations and legal constraints, trade union organizations and corporate political connections, this study reveals the unique role of firm-level Party branches in coordinating labor relations and improving employment protection. In especial, combined with the motivation of political promotion, this study investigates the internal mechanism and unique impact of local government officials intervening on micro firms’ employment behavior through the formal channel of Party branches when facing different promotion expectations and social unemployment pressure. This study contributes new knowledge to the literature of firms’ employment protection from the perspective of official promotion. Second, it expands the understanding of the governance role and function of Party branches in private firms. In recent years, the academic circles have examined the actual governance effect of Party branch construction in firms from multiple angles, but most of them focus on Party branches in state-owned firms, and seldom discuss the governance role of Party branches in private firms. This study directly shows the positive impact of Party branches on the quality of employee security in private firms, which deepens the understanding of the role of Party branches in non-public firms and the relationship between governments and firms in emerging markets. The findings mean that the government should further strengthen the guidance of Party branch construction in non-public firms in the new era, expand the coverage of Party branch construction in grass-roots non-public firms, and give full play to the unique role and governance value of Party branches in improving employee employment security, alleviating labor conflicts, and promoting employment stability.