Perverse Complementarity: Political Connections & the Use of Courts Among Private Firms in China

The Journal of Politics, Vol 76(2), pp. 318-332

15 Pages Posted: 2 Apr 2012 Last revised: 5 Oct 2014

Yuen Yuen Ang

University of Michigan - Department of Political Science

Nan Jia

University of Southern California - Marshall School of Business

Date Written: September 8, 2013

Abstract

Using survey data of over 3,900 private firms in China, we examine whether – and how – political connections promote or undermine the use of formal legal institutions. We find that politically connected firms are more inclined than non-connected firms to use courts over informal avenues of dispute resolution. Furthermore, by comparing the effects of political connections on dispute resolution patterns across regional institutional environments, we find that “know-who” (political influence over adjudication) dominates “know-how” (knowledge of navigating courts) in linking political connections to the use of courts. Contrary to canonical theories that predict the declining significance of connections following the expansion of courts, our study suggests that informal networks and formal laws are more likely to share a relationship of perverse complementarity in transitional and authoritarian contexts. Political connections are positively linked to the use of legal procedures, and the primary mechanism behind the link is “know-who” over “know-how.”

Keywords: Informal institutions, rule of law, political connections, dispute resolution, private firms, China

Suggested Citation

Ang, Yuen Yuen and Jia, Nan, Perverse Complementarity: Political Connections & the Use of Courts Among Private Firms in China (September 8, 2013). The Journal of Politics, Vol 76(2), pp. 318-332 . Available at SSRN: https://ssrn.com/abstract=2033230 or http://dx.doi.org/10.2139/ssrn.2033230

Yuen Yuen Ang (Contact Author)

University of Michigan - Department of Political Science ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

Nan Jia

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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