“Yes-Man” Firms: Government Campaign and Policy Positioning of Businesses in China

Abstract

Abstract We demonstrate material origin of strategic preference expression in authoritarian systems, where firms express dissent against or conform to the government's position based on what they seek to obtain from the government: politically powerful firms are more likely to dissent to negotiate policy concessions while politically weak firms are more likely to conform to the government's position to obtain side payments or to avoid punishment. We test this argument using survey experiments with firm executives in China. A treatment that signals the government's commitment to liberalize inward foreign direct investment increases the percentage of firms that report to “benefit” from the policy between 14 and 36 percentage points. Powerful firms (state- and foreign-owned) conform the least to the government and politically vulnerable firms and the recipients of government contracts conform the most. Our results suggest that political standing is a key driver of business position-taking in China.