The effect of historical government affiliations on resource acquisition and organizing capability: evidence from Chinese private firms

Abstract

PurposeGrounded in the structural and relational inertia literature, this paper aims to investigate how two types of founding conditions – prior state ownership and a founder’s state career history – may individually and interactively affect the resource acquisition and organizing capability of firms.Design/methodology/approachThis study uses a unique, large-scale survey of 480 manufacturing firms in China.FindingsThe findings show that prior state ownership is positively related to a firm’s resource acquisition, and the founder’s state career history moderates the relationship between prior state ownership and a firm’s organizing capability such that a founder with a state career history can help a privatized firm overcome its structural inertia and achieve superior organizing capabilities. However, it is found that a founder’s state career history is not associated with a firm’s resource acquisition or organizing capability.Research/limitations/implicationsFirst, this study is cross-sectional. Second, this paper refocuses on Chinese manufacturing firms in two regions only. Third, the authors do not have information on how long founders had been in state sector. Fourth, the measure of resource acquisition and organizational capability is a self-reported perceptual measure.Practical implicationsFirst, this study suggests that founders’ state career history does not benefit firms in resource acquisitions. Once founders do not work for government organizations, they can lose the associated resource benefits. The founders may have to actively maintain their historical connections with the current government officials to continue to receive various information and resource benefits. Second, this study indicates that it is possible for privatized firms to have resource acquisition advantages resulting from their historical heritage and at the same time overcome the inferior organizing capabilities from their histories by having a founder with a prior state career history. Such founders tend to have the ability to overcome the unfavorable imprinting effect of previous histories and to help private firms develop better strategies and structures to fit the dynamic and competitive environment.Social implicationsThis study indicates that it is possible for state-owned enterprises to become efficient if they can employ capable managers with superior managerial skills.Originality/valueCurrent literature on the effect of government affiliations on firm behavior and outcomes typically focuses on existing government affiliations and their benefits on a firm’s economic and information resources, legitimacy and new venture performance. This study is one of the first to examine how historical government affiliations may affect both the resource acquisition and organizing capability of a firm. In addition, existing studies have rarely studied simultaneously how a firm’s and a founder’s historical government affiliations may independently and interactively affect a firm’s ability to acquire resources and develop capabilities critical for a firm’s performance and survival. This study fills this gap.