What is the benefit of TMT's governmental experience to private-owned enterprises? Evidence from China

摘要

In China, the phenomenon of government officials entering business (xiahai)—government officials leave government organizations to enter into private-owned enterprises (POEs)—gives rise to an intriguing question: Why do POEs invite the participation of former government officials? Based on a sample of 100 Chinese POEs, our findings indicate that both the mean number of years of top management team's (TMT) governmental experience and the number of top managers with governmental experience in a TMT are positively related to a POE's political networking, which in turn contributes to POE performance. By doing so, this study adds governmental experience to the literature on TMT experience, and identifies the mechanism of governmental experience effect. Overall, we provide an underlying mechanism of the phenomenon of government officials entering business.