Business-government Relations Research Articles

The making of government-business relationships through state rescaling: a policy analysis of China’s artificial intelligence industry

ABSTRACT Developing artificial intelligence (AI) is a priority on China’s state agenda, yet the constitutive state roles in AI development are understudied. Against the background of the coexistence of authoritarianism and market liberalism in the governance of the Chinese economy, state rescaling is a useful lens to understand how China is developing this new strategic sector. This paper proposes an analytical framework reifying vertical and horizontal scalar relations via the rescaling lens and three state roles (owner, promoter, and supervisor) to explore how government-business relationships are made. More than 100 Chinese AI policy documents have been collected from central, provincial, and city levels for a systematic multi-scalar policy analysis. As a result, this paper captures both downscaling/upscaling within the state hierarchy and statization/destatization between state and non-state actors in China’s AI development. A series of intertwined state rescaling practices manifest themselves in the state roles figuring in three functionalities of government-business relationships (sponsorship, cultivation, and disciplining). It is argued that the state roles are not pre-given modalities in a setting of a specific industry. The restructuring and even revolutionizing effects of AI in the socio-economic systems prompt non-state actors to respond proactively, which shapes the variegated functionalities of government-business relationships.

How Business–Government Relationships Drive Digital Innovation and Entrepreneurship: A Study of 292 Cities in China Using NCA and TDQCA

Innovation is the driving force for achieving sustainable economic development, and healthy business–government relationships are the foundation and guarantee for promoting the sustainability of digital innovation and entrepreneurship. However, current academic research on the impact of business–government relations on digital innovation and entrepreneurship often neglects the configurational effects of various factors. Therefore, this study constructed an analytical framework from the new dimension of “close” and “clean” business–government relationships, selected 292 Chinese cities as research subjects, and employed the Necessary Condition Analysis (NCA) and Time-Differencing Qualitative Comparative Analysis (TDQCA) methods. From a configurational perspective, it explored the relationship between business–government relations and digital innovation and entrepreneurship. The results showed the following: Firstly, the various business–government relationship factors did not have a single linear impact on digital innovation and entrepreneurship, and configuration was more crucial than a single factor. Secondly, based on the integration of research findings and the theoretical framework, five successful configurations were proposed. However, these configurations possess certain adaptability and need to be tailored to local conditions. Thirdly, analyzing the three “non” condition variables in these five configurations, including “clean” business–government relationships, government efficiency, and new infrastructure, also contributed to enhancing the sustainability of digital innovation and entrepreneurship outcomes. Additionally, the study analyzed the implications of these critical configurations for five key stakeholders: government, enterprises, research institutions and academia, policymakers, and the public. Specifically, the government can implement policies tailored to local conditions to promote the sustainable development of digital innovation and entrepreneurship. These policies include increasing investment in digital infrastructure, simplifying approval processes, and enhancing the efficiency of government services.

Institutional Environment, Institutional Arrangements, and Risk Identification and Allocation in Public–Private Partnerships: A Multilevel Model Analysis Based on Data from 31 Provinces in China

As an important part of market-based reforms, the issue of “risk” has always been a part of the public–private partnership (PPP) debate, and the way in which risks are managed determines the sustainability of market-based reforms. This study systematically examines how the institutional environment and institutional arrangements affect the effectiveness of PPP risk identification and allocation. The study aims to establish a multi-source database of all publicized PPP projects in 31 provinces during the period of 2017–2021 in China, and it incorporates different levels of influencing factors, such as the institutional environment and institutional arrangements, into a framework. Through the application of a multilevel model, the impact of the political–institutional structure at the provincial level and institutional arrangements at the social capital and project levels on PPP risk identification and allocation is judged hierarchically. It is found that only social capital at the institutional environment level can directly and positively contribute to the effective identification and allocation of PPP risks, while both the degree of potential market competition and the degree of integration at the project level have a positive effect on its risk profile. In addition, there are cross-level moderating effects, with social capital, government transparency, and government–business relations positively improving risk allocation and identification through the degree of market competition, with no significant coordinating effect on the degree of contractual integration. This study goes beyond the existing one-dimensional risk profile analysis and risk typology to dismantle the “black box” of risk identification and allocation, which is a process of continuous negotiation, and to provide a sustainable governance mechanism for the market-oriented reform of public services in the institutional arena.

The Politics of Government–Business Relations in Urban Southeast Asia: Introduction and Overview

Recognising the increasingly urban character of Southeast Asian politics, our introduction to this special issue explores the varied patterns of government–business relations found across the region. In some urban centres, businesses form collusive rent-seeking relations with mayors and other politicians; in others, they support governance reform and urban renewal. In beginning to unpick this variation, we briefly highlight what we can learn from literatures on national-level government–business relations and subnational politics – emphasising that local-level government–business relations commonly diverge in significant ways from those at the national level. Next, we survey the articles that follow through three themes: relative strengths of local government and business across distinct urban settings; changes over time in the presence and efficacy of development coalitions spanning government and business; and recent innovations in government–business ties in certain cities. We end by calling for increased research into this important but poorly understood topic.

Heterogeneous political connections and corporate overinvestment: evidence from Malaysian firms

PurposeThis paper examines the relationship between heterogeneous political connections and corporate overinvestment.Design/methodology/approachBased on a comprehensive Malaysian dataset of 834 publicly listed companies from 2000 to 2022, the authors employed multivariate ordinary least squares regression to test the relationship.FindingsDespite different types of political connections, the findings demonstrate a positive relationship between political connections and corporate overinvestment. In particular, the association is more profound in government-linked companies (GLCs) but weaker in firms that developed political ties through family members of ruling elites. Further analysis reveals that the “helping hand” effect is only observed in GLCs and firms with politically connected directors and businessmen, whereas the “grabbing hand” effect is observed among firms connected through board, businessmen, and family ties. Moreover, the relationship is more persistent among firms with politically connected directors and businessmen around the regime change.Research limitations/implicationsRegardless of the types of political connections, the findings show that politically connected firms tend to engage in rent-seeking through political patronage networks and high levels of government interference in resource allocation. Therefore, a more sophisticated monitoring system should be developed within the political patronage networks to reduce the likelihood of different types of political-business collusion. In terms of research limitations, the research design does not consider the influence of financial constraints and management efficiency. Future research could explore these facets to comprehensively understand the dynamics between political connections and corporate investment decisions.Practical implicationsThe evidence informs market participants about the relationship between heterogeneous political connections and corporate overinvestment, reinforcing previous findings that crony capitalism, political patronage, agency problems, and weak governance are well-entrenched in Malaysia’s emerging economy. The government should acknowledge these concerns by enacting anti-corruption campaigns and promoting a fair business environment. In the meantime, policymakers might redesign regulations and revise corporate governance frameworks to substantially reduce the value of political connections, thereby diminishing the bargaining power of politicians.Social implicationsAs corporate investment efficiency has a considerable impact on firm value, investment decisions that enhance firm value will increase share price and maximise shareholder value. Conversely, firms may damage shareholder value if they overinvest or undertake projects that do not yield sufficient. Hence, the findings of this study may assist investors in making more informed judgements, particularly by understanding different types of business-government relations, as political connections are one of the determinants of corporate overinvestment.Originality/valueThis study reveals that the degree to which overinvestment issues manifest within firms is influenced by the nature of the political connections those firms possess. This indicates that politically connected firms should not be regarded as a homogenous group of firms.

The Evolution and Institutionalisation of Business–Government Relations: Public–Private Partnerships in Khon Kaen, Thailand

How does the nature of business–government relations shape the capacity of local governments to accomplish their development objectives? How do different patterns of business–government interaction affect the quantity and quality of public services and the ability of citizens to hold policymakers accountable for their performance? This article attempts to answer these questions in the context of one municipality in Thailand, Khon Kaen City. We argue that the political economy of business–government relationships in Khon Kaen can be divided into three eras, each defined by a different model of business–government interaction: the government-led model, the contracting model, and the public–private partnership model. We describe how the character of business–government relationships has changed across these different models, focusing on three dimensions: (1) the degree to which ties are formalised or institutionalised, (2) the extent to which local businesses coordinate, cooperate, or collude amongst themselves, and (3) the distribution of power between the local government and businesses. We also analyse the drivers behind the shift from one model to another and consider the implications of each for local development and service provision, patterns of rent-seeking, and levels of accountability and participation.

Can Managers' Short-Sightedness Be Reversed Through Close and Clean Business-government Relationships?

This research uses a sample of Chinese listed firms from 2017 to 2020 to empirically evaluate, based on institutional theory, the influence of close and clean government-business relationships on managers' shortsighted conduct. Close and clean government-business relationship can effectively inhibit managers' short-sighted behavior, and both close government-business relationship and clean government-business relationship can effectively inhibit managers' short-sighted behavior. Government services are mostly employed in the closeness aspect to encourage managers to create long-term goals, and in the cleanness aspect to restrain managers' opportunistic behavior through government integrity and transparency. Managers' shortsighted behavior is inhibited by close and clean government-business relationships, and this effect is especially pronounced in state-owned firms where institutional investors own a significant number of the shares.

Open government data and resource allocation efficiency: evidence from China

ABSTRACT Data are among the most valuable resources. This paper, utilizing the China Tax Survey Database from 2009 to 2016, investigates the impact of Open Government Data (hereafter, OGD) on the efficiency of resource allocation among firms within the Chinese context. The findings indicate that OGD significantly reduces the deviation in firms’ factor inputs, thereby enhancing the efficiency of resource allocation. This is primarily achieved through the optimization of government-business relationships, the reduction of rent-seeking costs, and the decrease in information asymmetry. Given the inclusive nature of OGD, it has a more pronounced positive impact on disadvantaged firms and cities. Furthermore, while OGD directly improves representative firm’s TFP, its greater economic impact lies in elevating aggregate TFP by enhancing resource allocation efficiency. In the current global economy, highly dependent on data-driven processes, the conclusions of this paper provide a novel perspective on the role of OGD in enhancing productivity. This has significant implications for accelerating the implementation of open data policies and enhancing economic efficiency.

Canadian Nickel for Nazi Germany – How Government-Business Relationships Affected British Blockade Strategies in the 1930s

This article presents a case study of the Canadian-based International Nickel Company (INCO) and its efforts to develop the German market in the 1930s, contributing to Nazi-German war preparations and hampering British blockade strategies. It examines government-business relations in blockade planning and argues that conflicts of interest and information asymmetries between state and business actors affect blockade preparations. In times of peace, trade flows are shaped mainly by private actors. They often have an information advantage, but are primarily pursuing their business interests, which can result in either alignment or conflicts of interest. Understanding the government-business relations in blockades is key to understanding blockades and economic warfare in general. Previous research has found evidence of alignment of interests, such as companies using state autarky policies in Nazi Germany and Fascist Italy to develop new markets. Similarly, companies employed the strategy of an independent British Empire in strategic raw materials to develop markets. However, government-business relations in the context of British blockade planning have not yet been thoroughly investigated. Drawing on private and public archival material from Britain and Germany, this case study examines the motives and strategies of INCO, British and German war planners.

Governments and Markets in the Digital Age

Abstract The academic literature has revamped its interest in economic statecraft, geoeconomics, geopoliticization of trade and technology sectors, and in the role of value chains as vectors for exerting control over critical technologies. However, there has been less reflection on state-market relations in the production of technological innovation and on the evolution of government business relations. Four recent books address these two important issues from different angles. Mazzucato and Mallaby’s books focus on the right mix of state and market needed to stimulate technological innovation, and they do so from opposite perspectives. Chen and Ripley’s books look, respectively, at the rise of Tencent as one of China’s major big tech companies and the rise of SpaceX as a key private player in the traditionally state-led US space market. These two books are therefore of interest to gauge the evolving relations between government and private businesses in two key areas of current geopolitical competition, the digital and the space sectors. The aim of this review essay is not only to briefly summarize the content of these books and their strengths and weaknesses, but also to use them as a starting point to reflect on the mix of state and market in the production of innovation, and on government-businesses relations in digital markets.

Chinese Firms’ Corporate Political Capabilities in Overseas Markets

Multinational enterprise managers increasingly face the challenge of maintaining their firms’ international operations under geopolitical uncertainty. In response, MNEs need to build firm-specific organisational capabilities to address geopolitical challenges and manage the conflicting interests between the host and home countries. While corporate political capabilities can vary at the country level, firms differ in their relationships with the home-country government. In my dissertation research, I investigated the role of the home-country government in shaping firms’ corporate political capabilities in overseas markets. This research provides new frameworks and tools for international business practitioners to manage business-government relations at home and abroad.

Government–business relationship and strategic transformation of enterprises: Evidence from China

This research uses data from private firms listed on China's A-share market (2016–2020), investigating the positive impact of strong regional government-business relations on firms' strategic transformations. Results indicate a positive correlation between healthier government-business relationships. Path testing reveals that the relationship primarily enhance the level of strategic transformation in private enterprises by reducing financing constraints within enterprises. This effect is stronger in areas with higher marketization levels and where management has significant shareholding. The study enriches understanding of the economic benefits of healthy government-business relations and offers empirical insights for enhancing strategic transformations in private enterprises.

Impact of economic policy uncertainty on audit fees: Evidence from Chinese listed companies

High economic policy uncertainty in China amplifies operational risks and managerial pressure for businesses while driving the demand for independent audits. However, previous studies have paid limited attention to the impact of economic policy uncertainty on audit fees. This study aims to examine the impact of economic policy uncertainty on audit fees and to test whether the internal control quality will moderate this association at the firm level. This study employs the economic policy uncertainty index to measure uncertainty. The paper examines 3,469 Chinese A-share listed companies from 2007 to 2020, using STATA 17 for fixed-effects regression on panel data. The results show a robust positive association between economic policy uncertainty and audit fees (β = 0.0302, p < 0.001). However, this association is weaker for companies with better internal control quality (β = –0.0229, p < 0.001), suggesting that effective internal controls can mitigate the impact of economic policy uncertainty on audit fees. Furthermore, the findings indicate that this positive association is weaker for state-owned companies compared to non-state-owned companies (β = –0.0170, p < 0.001). At the same time, the study does not establish a significant difference in the positive association between TOP 10 and non-TOP 10 accounting firms. This study examines the adverse effects of economic policy uncertainty from the perspective of audit fees. The results have implications for stakeholders, including the need for companies to establish effective internal controls and good government-business relationships and for governments to reduce economic policy uncertainty and increase transparency in their policies.

INSTRUMENTS OF STATE SUPPORT FOR SHIPBUILDING: GLOBAL EXPERIENCE

The article explores the challenges stemming from the authors' perspective on Ukraine's future business endeavours pertaining to the exploitation of World Ocean resources. Authoritative statistical data analysis from international organizations has shown that many coastal countries are making full use of their advantageous geographical position to address critical challenges such as food provision (by means of fish and seafood industrial production, algae cultivation, and mariculture) and the stabilization of the respective regions' social situation through job creation and maintenance. The objective focus of shipbuilding as a manufacturer of specialized equipment facilitating human labor in the harsh sea and ocean environments is presented. The business-government relations are examined through the example of prominent maritime nations, providing valuable insights.

Symbol or substance? Environmental regulations and corporate environmental actions decoupling

Our paper focuses on how firms strategically respond to environmental regulations on environmental actions. Given the greater discretion in environmental information disclosure and relaxed environmental regulations enforcement in China, we propose that firms tend to say more while do less to obtain environmental legitimacy, namely corporate environmental actions decoupling. Using a sample of 5422 Chinese firm-year observations over the period of 2012–2018, we document that stringent environmental regulations contribute to a significant inconsistency between environmental reporting and actual environmental performance. Moreover, we demonstrate that this inconsistency is exacerbated when firms possess greater bargaining power and fewer financial resources. Our paper not only advances the understanding of how firms navigate external regulations by examining the tradeoffs between symbolic and substantive actions, but also sheds light on factors influencing decoupling/greenwashing practices from the perspective of government-business relations in China, and potentially in other emerging economies.

Private Investment in Chinese Football Clubs: Political Capital and State–Business Exchanges

Business–government relations play a crucial role in China's economic development and policy implementation. Situated in an asymmetric dependency nexus, local officials court business investments to facilitate policy and boost their political careers, while under Xi Jinping private firms are increasingly incentivised to support party-state goals to gain access to political capital. In this study, we use the case of football development to show how private business actors and government officials enter reciprocal relationships based on the exchange of respective financial and political capital. Using insights from semistructured interviews with practitioners and macro-level data, such as investors’ characteristics and financial data, we explore the role of political capital in state–business exchanges, specifying the mechanisms of this interaction (motivations, forms, and perceived benefits) and three distinct investment scenarios in the case of football. Besides insights into the sector, the article contributes to the understanding of the modus operandi of private business and local government in the Chinese political economy at large.

Impact of new government–business relations on urban digital economy: Empirical evidence from China

Drawing from dynamic capability theory, we investigate how new government–business relations impact urban digital economy with mediating and moderating effect model, using panel data from 242 prefecture-level Chinese cities over 2017–2019. We find that building new government-business relations promote urban digital economy, with urban service capability playing a mediating role. We also find that digital infrastructure strengthens the impact of urban service capacity on urban digital economy. These findings are robust and more significant in eastern and larger cities. Our study provides new evidence on exploring mechanism and conditions by which new government-business relations influence urban digital economy.

“An Imperial Clearing House for Commercial Information and Suggestions:” The British Imperial Council of Commerce, 1911–1925

AbstractThis paper departs from the preoccupation in the literature with the pressure group activity of single chambers of commerce by examining an influential but previously neglected federated business pressure group, the British Imperial Council of Commerce (BICC). Set within interlocking dynamics of British Imperial and global history and the clamour for imperial preference, it focuses on BICC's interface with the British government and its overseas dependencies in the context and vortex of Imperial economic policy, the First World War, interimperial competition, especially Anglo–German rivalry, and the vagaries of the world political economy. This essay provides insights into the internal affairs of the BICC, business–government relations in the British Empire, and the political economy of the Empire between 1911 and 1925. It demonstrates how the BICC, focused on Imperial economic governance, navigated the conflict between the prevailing ideology of laissez faire (free trade) and the clamour for xenophobic protectionism during the First World War and its aftermath. The paper highlights the limits of business pressure group activity, and the impact of the war and its aftermath on the BICC.

Why Compete for Firms? Electoral Effects of Corporate Headquarters Relocation

AbstractWhy do local and state governments in the United States compete to attract and retain corporations in their jurisdictions even by offering generous incentives, which can jeopardize public spending on other needs? This research shows that the answer can lie in the electoral effects of headquarters (HQ) relocation. Using an original data set of interstate HQ relocation cases covered in the news media from 1995 to 2015, this research finds that interstate business location decisions affect gubernatorial election outcomes. However, empirical analyses provide evidence that voters use different attribution processes when considering HQ relocation‐in versus relocation‐out cases: HQ relocation‐out results in greater support for Republican candidates, whereas HQ relocation‐in increases support for the incumbent party. Supplementary analyses suggest that the perceptual effects and symbolic value of HQ relocation, rather than its immediate local economic effects, drive electoral outcomes. The findings have implications for electoral accountability and the political economy of business–government relationships.

The effect of corruption level in steering the business–government relations: evidence from 23 African countries

PurposeThe purpose of this paper is to investigate the effect of corruption level in steering the business–government relations (BGRs) in developing countries. It also examines the moderating effect of firm size.Design/methodology/approachUsing robust tobit and probit models, this study tests the response behavior of 9787 firms from 23 African countries to their government's policy and regulations and the direct effect of corruption control level in their response decisions. The authors also perform several other additional analyses to ensure the robustness of the findings, including change analysis, two-stage model and recursive bivariate model.FindingsThe result shows that corruption level is among the significant factors that drive BGRs exponentially. The finding points out that, there is a strong alliance of business and government in more corrupt countries. Moreover, the impact of corruption level exacerbates when the firm is bigger.Research limitations/implicationsManagers should focus more on activities that create long-term sustainable advantage. Valuable time of the senior managers should not waste on negotiating government policies to earn a short term advantages.Practical implicationsIt is evident that legal and transparent government alliances can lead to economic rent for firms. However, it is important to note that any alliance based on corruption and illegality is short-lived and ultimately detrimental to long-term prosperity. Therefore, it is crucial for firms to prioritize ethical business practices and build relationships with governments that prioritize transparency and accountability.Social implicationsGiven the detrimental impact of corruption on economic progress, it is crucial for Africa policy-makers to prioritize reforms aimed at reducing its adverse effect. By implementing ethical and transparent business practices, countries can attract more investment and promote economic growth.Originality/valueThis study contributes to the existing literature on the passive form of political connectivity/activity and to what extend corruption level affect the political activities of firms.