Global expansion and executive promotion of state-owned enterprises

Abstract

Research Summary

Executives in state-owned enterprises (SOEs) are promoted differently from those in private firms due to the broader objectives of SOEs, which include non-economic considerations. Research on SOEs often attributes executive promotions to firms' economic performance, without sufficient attention to the role of political performance. We find that executives of SOEs aligned with a government's globalization mandate, especially those investing in countries with political affinity, are more likely to be promoted as these investments further the government's political objectives and enhance executives' legitimacy with the bureaucratic system. The study broadens the literature on executive compensation by arguing that political alignment with government objectives matters. It also enriches institutional theory by suggesting a state-firm-executive legitimacy transmission.

Managerial Summary

When executives of SOEs align with a government's globalization goals and focus their investments in specific industries and countries, they often find more significant opportunities for career growth. Our detailed analysis, centered on SOEs directly overseen by the Chinese central government, supports our findings. This research offers valuable insights for the global strategy of SOEs. It suggests that while these investments can enhance the chances of advancing SOE executives who align with the state's political vision, promoting them based solely on political alignment, without considering long-term project performance, may lead to challenges, underscoring the need for a balanced approach.