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Hiding in the Crowd: Government Dependence on Firms, Management Costs of Political Legitimacy, and Modest Imitation

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Abstract

Although previous studies primarily claim that government-dependent firms can actively engage in compliance activities in order to achieve political legitimacy, access government resources, and build competitive advantages, these studies largely ignore how firms react when firm-dependent governments exert coercive pressures. We thus introduce institutional theory and the behavioral theory of social performance to develop a model of modest imitation, and we propose that the more governments depend on privately owned firms, the more firms demonstrate average social performance in order to balance efficiency concerns with political legitimacy threats. Meanwhile, whether firms imitate peers’ social performance depends on the magnitude of institutional rigidity. In turn, issue salience and spatial proximity undermine modest imitation, and political connections strengthen modest imitation. We study how all listed, privately owned firms react to the Chinese government’s call for social engagement in poverty alleviation initiated in 2015. This study uses a two-stage Heckman selection model to correct for sample-selection bias, and the results provide strong support for our arguments. This research thus extends our understanding of modest imitation in response to coercive pressure from-dependent governments.

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  1. http://www.gov.cn/xinwen/2015-12/07/content_5020963.htm.

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Funding

This study was funded by grants from National Natural Science Foundation of China (Grant Nos. 71932007; 71672139).

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  1. School of Management, Northwestern Polytechnical University, No. 127 Youyi West Road, Xi’an, 710072, Shaanxi, China

    Yi Xiang & Ming Jia

  2. School of Management, Xi’an Jiaotong University, No. 28 Xianning East Road, Xi’an, 710049, Shaanxi, China

    Zhe Zhang

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  1. Yi Xiang
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Correspondence to Ming Jia.

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Xiang, Y., Jia, M. & Zhang, Z. Hiding in the Crowd: Government Dependence on Firms, Management Costs of Political Legitimacy, and Modest Imitation. J Bus Ethics 176, 629–646 (2022). https://doi.org/10.1007/s10551-020-04709-9

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