Institutional Change Driven by Corporate Political Entrepreneurship in Transitional China: A Process Model
Gao, Yongqiang, International Management Review
Corporate political entrepreneurship is one of the important political strategies used by corporations to seize the business opportunities that have emerged from the political arena. This strategy is more popularly used in transitional countries, since in such countries, the social and economic transition force of business entrepreneurs' abilities to change the existing, unreasonable governmental policies or regulations. China is just such a country. Although the theory of institutional change has been studied extensively in the field of institutional economics in the past fifty years, the process and actions used by corporate political entrepreneurs to change present institutions have been overlooked. This article wants to discuss that. In this article, a three-phase process model and four approaches to institutional change are proposed. Then, a case study is used to illustrate the process model. This study will help foreign companies understand the institutional environment and the game rules of institutional change in transitional China.
[Keywords] Approach; case study; corporate political entrepreneur; institutional change; process model
Corporate political strategy, as a complement to business strategy, has received much attention in organization and management research (Baron, 1997; Gao, 2006; Getz, 1997; Hansen and Mitchell, 2001; Hillman and Hitt, 1999; Schuler et al., 2002; etc.). This is mainly attributed to the increase of the government's involvement in business operations in the last three decades. As a result, businesses have had to take strategies or actions to avoid the negative effects of policies or regulations, as well as to gain competitive advantage against industrial rivals by strategically using government policies or regulations (Gao, 2007; Shaffer, 1995; Vining et al., 2005).
Among various political strategies and actions, political entrepreneurship is identified as an effective strategy in dealing with government agencies (Noth, 1990; Scott, 2001; Seo and Creed, 2002; Yoffie, 1985). This strategy has become more widely used since the 1970s and needs special attention from business leaders (Yoffie and Bergenstein, 1985). For example, Bill McGowan, the former president of MCI (Micro Communication Inc.), acts as a political entrepreneur. He successfully sued AT&T for its monopoly in the telecommunications industry in 1974, which lead to the breakup of AT&T and the change of industrial regulations in the American telecommunications industry.
However, though corporate political entrepreneurship is widely used in practice, theoretical studies fall far behind. Campbell (2004) argued that an important but under-examined issue with respect to institutional theory has been the patterns of institutional changes. Scholars have not paid much attention to "when, why, and how" organizational actors influence institutional changes (Burns and Nielsen, 2006). In corporate political action (CPA) literature, corporate political entrepreneurship is only mentioned as a political strategy, and the behaviors of political entrepreneurs and the process of institutional change is far from being discussed. In institutional economics, researchers focus mainly on the generalized mode of institutional change/change and not on the micro behavior of political entrepreneur. The strategies or tactics of corporate political entrepreneurs are not discussed. Moreover, different nations form different institutional contexts (Busenitz et al., 2000; Calori et al., 1997; DiMaggio and Powell, 1983; Harper, 2003), and companies face different options (strategies and actions) in changing institutions. This means that research on corporate political entrepreneurship should be a condition in the special institutional context of a given country. Accordingly, companies should develop country-specific political strategies. In other words, strategies should be tailored to the specific issues, institutions, and interest that prevail in a country (Baron, 1995, 1997; Hillman and Keim, 1995; Murtha and Lenway, 1994). …