Loyalty-Based State Control: Examining the Influence of Board Political Ideology on Corporate Decision Making in Autocratic Regimes

This project investigates how autocratic governments control firms through exposure of their elite decision makers to state political ideology. By highlighting the congruence of political actors around a singular set of ideological doctrines in autocratic regimes, we argue that corporate elites exposed to state political ideology develop loyalty to the ruling political party, thus becoming “agents of the state” who facilitate corporate conformity with evolving state public policies by influencing boardroom decision making. This loyalty can be used as a tool for state control over firms, as it allows the top leader to interpret the prevailing political ideology personally to redirect the prescribed behavior for these loyal agents. We further explore differences in receptivity to this loyalty-based control mechanism, proposing that the effectiveness of political-ideological control is more pronounced in regions that bear the imprints of the top leader’s historical power base but less conspicuous in regions with a stronger bureaucratic presence, rendering them less susceptible to policy swings. We exploit China’s 2012 political-ideological transition from “Dengism” to “Xiism” to test our ideas. Our study demonstrates how political-ideological beliefs and corporate elite decisions evolve in tandem in autocratic contexts, and it advances management scholarship on the role of political ideologies in the boardroom by emphasizing the corporate control function of state political ideology.