Red Capitalists: Political Connections and the Growth and Survival of Start-Up Companies in China

Abstract

This paper analyses the role of political connections in the post-entry performance of private start-up companies in China. It documents robust evidence that political affiliation enhances firms' survival and growth prospects, even if politically neutral start-ups enjoy faster productivity improvements. In addition, the benefits of political connections are largely confined to firms associated with local or top level governments, and they are more pronounced in capital-intensive industries.

Keywords: China, political connections, growth, survival

JEL Classification: P16, D2