Corporate political connection, rent seeking and government procurement order

Abstract

Government procurement serves as the primary means through which the government utilizes market mechanisms to forge economic linkages with enterprises. Government procurement orders endow enterprises with ample cash flow, thereby alleviating their financing pressures. Enterprises are highly motivated to secure government procurement orders through both market competition behaviors and non - market behaviors. However, the factors influencing how enterprises obtain these orders remain inadequately explored. Drawing on institutional theory and rent - seeking theory, this paper endeavors to investigate the mechanism by which enterprises acquire government procurement orders via political connections. By incorporating rent - seeking as a moderating variable, it elucidates the specific path through which enterprises' non - market behaviors impact government procurement orders and analyzes the moderating mechanism of the business environment on this causal relationship. The empirical research, based on manually collating government procurement contract data from the China Government Procurement Network and matching data on the political connections and rent - seeking of A - share listed enterprises from 2016 to 2020, reveals that: enterprises' political connections exert a significant positive influence on government procurement orders. Moreover, rent - seeking plays a significant positive moderating role between enterprises' political connections and government procurement orders, while the business environment has a significant negative moderating effect in this regard. Further analysis indicates that for enterprises in regions with an improved business environment and higher fiscal transparency, the efficacy of obtaining government procurement orders through political connections and rent - seeking is notably attenuated. This paper expands the academic research on enterprises' acquisition of government procurement orders through non - market behaviors and offers valuable practical insights for the future improvement of China's government procurement system.