Events

Prof. Milo Wang
Assistant Professor of Management
Arizona State University

Although research has shown that environmental and social protests can indirectly influence untargeted firms through informational spillovers, we propose that these indirect effects are not confined to informational cues alone. Considering local government officials’ responses to environmental and social protests, we argue that activism can also affect untargeted organizations via a resource-spillover effect. Specifically, when politicians perceive street protests as a threat to their job security and prospects for promotion, they may adopt a middle ground approach, taking policy stances that sit between symbolic gestures and directly addressing activists’ environmental and social grievances. These policies, in turn, can contribute to the creation of new organizations. Using a longitudinal dataset organized by city-year observations in China between 2008 and 2019, we examine how street protests over environmental and social issues can indirectly affect the founding of new ventures, which are particularly sensitive to changes in available resources and operating costs. Results show that local government officials’ response to street protests indirectly facilitates entrepreneurship by lowering business operating costs and increasing access to capital. Further, the resource spillover effect on businesses is accentuated by the political-opportunity structure that enhances the impact of street protests on the responses of local politicians.