'Yes-Man' Firms: Government Campaigns and Policy Positioning of Businesses in China

Abstract

We advance a theory of strategic preference expression in authoritarian systems, where business elites express dissent or conformity to the government based on material incentives. Their position-taking strategies vary depending on whether firms have the bargaining power to extract benefits or avoid punishment from the government. Using survey experiments with firm executives in China, we show that a government campaign treatment — a preface that signals the government’s commitment to opening further to inward foreign direct investment (FDI) — increases the percentage of firms reporting “benefit” from inward FDI between 14 and 36 percentage points. The executives of politically vulnerable firms (private owned) conform to the government’s position the most. Private firms with higher financial dependence on government conform more than their non-private counterparts. The executives of powerful firms (state-owned and foreign-owned) change their responses the least to induce policy concessions. We demonstrate a material origin of political desirability bias in autocracies.

Keywords: authoritarian systems, political desirability, China, survey experiments, policy campaigns, firms, foreign direct investment (FDI)