The effects of government relation and institutional environments on channel performance

Abstract

PurposeThe purpose of this paper is to examine the importance of channel partners’ government relations within channel performance and explore how institutional factors interact to influence channel performance. A theoretical framework, inclusive of hypotheses, is proposed to demonstrate the interaction of government relations and institutional environments on firm performance. Drawing on an institutional perspective, this paper suggests that the effect of partner’s government relations on firm performance is moderated by institutional environment factors, such as government interference, legal protection, and the importance of guanxi.Design/methodology/approachThis study conducted a questionnaire survey and collected data from 393 Chinese manufacturer managers in China.FindingsPartner’s government relations increase focal firm’s performance and this effect is moderated by different levels of legal protection. Partner’s government relations increase firm performance only in the context of high-legal protection; whereas, when legal protection is low, partner’s government relations decrease focal firm performance. As for the interaction of institutional factors, legal protection and importance of guanxi, all three moderate the negative effect of government interference on firm performance.Originality/valueThis paper provides insights on how channel partner’s government relations, representing a key institutional capital, interact with institutional environment factors to influence channel performance.