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Published in: Journal of Business Ethics 4/2022

03-01-2021 | Original Paper

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

Authors: Yi Xiang, Ming Jia, Zhe Zhang

Published in: Journal of Business Ethics | Issue 4/2022

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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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Metadata
Title
Hiding in the Crowd: Government Dependence on Firms, Management Costs of Political Legitimacy, and Modest Imitation
Authors
Yi Xiang
Ming Jia
Zhe Zhang
Publication date
03-01-2021
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 4/2022
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-020-04709-9