GEP Research Paper 07/40
Red Capitalists: Political Connections and the Growth and Survival of Start-up Companies in China
Jun Du and Sourafel Girma
Summary
This paper analyses the role of political connections in the post-entry performance of private start-up companies in China. It shows that political affiliation enhances firms’ survival and growth prospects, even if politically neutral firms enjoy faster productivity improvements.
Abstract
This paper analyses the role of political connections in the post-entry performance of private start-up companies in China. It documents robust evidence that political affiliation enhances firms’ survival and growth prospects, even if politically neutral start-ups enjoy faster productivity improvements. In addition, the benefits of political connections are largely confined to firms associated with local or top level governments, and they are more pronounced in capital-intensive industries.
Issued in November 2007
This paper is available in PDF format