Religiosity and Political Connections of Private Firms in China

Abstract

The extant literature on political connections has paid little attention to the role of entrepreneurial traits in firms’ pursuit of connections with government agencies or bureaucrats. Using a nationally representative survey of private enterprises in China, we investigate whether and how religious beliefs of entrepreneurs affect their firms’ reliance on political connections. We find that firms founded by religious entrepreneurs are significantly more likely to establish political connections compared to firms founded by nonreligious entrepreneurs. The positive relation between religiosity and political connections, however, is found to exist only in regions with weak market-supporting institutions. Considering the link between religiosity and risk aversion, our findings suggest that religious entrepreneurs, especially those in regions with underdeveloped institutions, may establish political connections so as to reduce the institutional risks in their business operations.