Taking the “Red Hat” off Chinese Private Entrepreneurs

Abstract

China's new capitalists, who have arisen from the booming private sector in the postcommunist era, are widely regarded as supporters of China's authoritarian political regime—the oft-cited “red capitalists.” Challenging the common view on the close connections between private entrepreneurs and political elites, this study applies an agency-centered perspective to examine how private entrepreneurs' organizational strategies in coping with formidable institutional environments created by the government have shaped their political values. From statistical analysis of a firm-level nationally representative data set, I find little evidence in the existing literature for the often depicted “redness” of Chinese private entrepreneurs. Although political connections that entrepreneurs seek to build with the government help mitigate the effects of institutional obstacles on their political opinions, such entrepreneur-state connections alone lead to entrepreneurs' unfavorable views on the polity. Private entrepreneurs' organizational innovations and particularly collaborative innovations beyond the firm level are found to significantly shape their political values, contributing to their potential role as political opponents in the future.