Keep a watchful eye on both: The impact of the joint terms of ruling party and government leaders on family firm government subsidies

Political connections play a key role in family firms receiving government subsidies. However, previous research has not focused on the duality of the political connections between the ruling party and the government. Based on the joint terms of the party and government leaders, which constitutes a new perspective, we analyze how family firms address this duality as they seek stable and continuous subsidies. We test our theory in the context of Chinese listed family firms and local leadership databases between 2007 and 2019. In this empirical study, we demonstrate that longer joint terms for ruling parties and government leaders enhance the stability of family firms’ political connections and benefit enterprises that are more likely to receive continual government subsidies. This effect significantly weakens in regions in which marketization is more advanced because resource allocation gradually shifts from government mandates to the market. Therefore, family firms in such regions must adapt by seeking a stable developmental environment in the midst of dynamic institutional change. In our study, we expand the literature on political connections and the corporate political activity (CPA) of family firms in emerging markets.