Not All Political Ties Are the Same: Firms’ Ties to the Government and Pollution

Complementing research on the implications of political ties for firms’ strategic decisions and financial performance, recent studies are increasingly focusing on the environmental consequences of firms’ political connections. We contribute to this stream of work by integrating insights from the literature on political ties and the multifaceted nature of governments to explore how the level of government influences the pollution implications of firms’ political ties. Specifically, we theorize and demonstrate that, in China, firms’ achieved political ties with high levels of the government reduce pollution, while such ties with low levels of the government increase it. Furthermore, we examine how these relationships are moderated by firm owners’ social class and the attention by different levels of the government to their respective primary goals. Our analysis of data from 6,758 privately-owned Chinese enterprises provides support for our predictions. Our main conceptual contribution is to add more nuance to the research on political ties by highlighting the contingent role of the level of government in shaping firms’ pollution outcomes.