How imprints of environmental turbulence influence board chairs’ political network adaptation.
Prof. Dean Xu
Professor of Management
Monash Business School
Monash University
Corporate leaders respond to political turbulences by adapting their political strategies. Without knowing how long turbulences will last, they often base their actions on their personal perceptions about the time length of the turbulences. Drawing from imprinting theory, we propose that board chairs’ early life experiences with transient versus lasting political turbulences create an imprinting effect on their subjective evaluation of the duration of the current political turbulence. An imprint of transient turbulence leads them to perceive current turbulence as short-lived, prompting them to remove existing political ties and establish new ones more swiftly. Conversely, an imprint of lasting turbulence causes them to perceive the current turbulence to be long-lasting, inclining them to wait longer to make a move. We further suggest that board chairs who are more deeply embedded in the existing political networks are likely to experience more difficulty adjusting their political ties, whereas the less embedded firms can more easily do so. We use Chinese firms’ political connection adaptation after anticorruption shocks to construct a DID design to test the above theoretical predictions. Results based on a sample of 20,645 firm-year observations of 2,562 firms between 2012 and 2019 provide support for our hypotheses.
