Is Entrepreneur-Politician Alliance Sustainable During Transition? The Case of Management Buyouts in China

Abstract

This paper explores the dynamic interactions between entrepreneurs and politicians in transition China through an unconventional lens of management buyouts (MBOs). Specifically we identify two contrasting outcomes of entrepreneur-politician alliances: Privatization buyouts by entrepreneurs and failed MBOs implying the collapse of the original alliance. Drawing on the rent appropriation literature, we treat Chinese MBOs as a bargaining, clarification, and redistribution of organizational rent between entrepreneurs and politicians, and further develop a model of entreprepreneur-politician bargaining that identifies the determinants of varying rent bargaining (MBO) outcomes.

Keywords: Entrepreneur, Politician, Management Buyout (MBO), China, Transition