How does the institutional environment affect the formation of political connections?

Abstract

While prior research has suggested that connections between business leaders and political actors are a primary determinant of firm strategy and performance, relatively little attention has been directed to how those political connections are determined by various institutional environments. Drawing on institutional theory and the perspective of social network, I argue that the weak institutional environment fosters the political connections. Specifically, as a complement to previous research that has clustered institutions, I unbundle institutions into property rights institutions and contracting institutions and specify how the status quo and the credibility of different institutions differentially affect the process of tie formation. Moreover, I investigate whether the effects of institutions may vary across different types of political connections. Lastly, I consider the moderation effect of entrepreneursb