The effects of entrepreneurs’ socioeconomic status and political characteristics on new ventures’ establishment of formal political ties in China

Purpose – This study aims to examine, by drawing upon resource dependence theory and upper echelon theory, how entrepreneurs’ socioeconomic statuses and political characteristics influence the establishment of formal political ties by new ventures, and how these relationships are moderated by new ventures’ degrees of innovation and internationalization. Design/methodology/approach – An empirical research approach is used in this paper. This is because this model evaluates the interaction effects between the socioeconomic statuses and political characteristics of entrepreneurs and the market strategies of their new ventures. Moderated multiple regression models were used to test our hypotheses with data from 2,297 new ventures in China. Findings – Using a questionnaire survey about new ventures in China, it was found that entrepreneurs’ socioeconomic statuses and political characteristics are positively related to the establishment of formal political ties by new ventures. It was also found that this positive relationship is stronger when new ventures have a higher degree of internationalization, while the relationship between the socioeconomic statuses of entrepreneurs’ and the establishment of formal political ties by new ventures is weaker when new ventures have a higher degree of innovation. Research limitations/implications – This research provides a deeper insight into the personal roles that are played in the establishment of formal political ties and it advances the research into new ventures’ competitive strategies. Practical implications – This study reveals the situations in which formal political ties are connected with new-venture advantages in China, and it will help entrepreneurs establish and use formal political ties strategically to correspond with the different strategies of new ventures. Originality/value – This research distinguishes the effects of two types of personal status on the establishment of formal political ties by new ventures, and it contributes to an understanding of the situations under which entrepreneurs should establish formal political ties. The findings will also be helpful for entrepreneurs who are choosing how to combine their market and non-market strategies.