The power of implicit political capital on companies’ entry barriers

Abstract

The paper distinguishes the political capital of private enterprises into three types, in terms of the political identity of entrepreneurs, partial state ownership, and government background of entrepreneurship. The first two are classified as explicit political capital, while the third is called implicit political capital. We investigated how political capital, the institutional environment, and access to protected industries intersect within private sector enterprises (PSEs). The data sample from 2011 to 2018 of listed private companies in China is employed. Firstly, the findings indicate political capital significantly enhances access to protected industries for PSEs. Second, implicit political capital shows a strong impact, while the effects of partial state ownership and entrepreneurs’ political identity are weak. Third, explicit political capital weakens the effect on access to protected industries, while implicit political capital still holds significant influence under the improvement of institutional environments. It reveals the situation under the imperfect environment of the market economic system and legal system in China. To be explicit, the concept of ruling by man or power is deeply rooted in the traditional Chinese social governance and social structure model. Therefore, there is enormous room for implicit political capital to function.

Keywords

• Political capital
• Institutional environment
• Protected industry
• Social governance