Politics for Survival: Ideological Control and Corporate Strategic Behavior

Ideological control is widely adopted in authoritarian regimes and is often seen as a top-down process. This article advances an alternative view that focuses on its bottom-up part, where firms not only comply with state power but also utilize the control to advance their interests. We substantiate this claim by studying how firms reacted to the policy shift in China during 2017–2018. Using an original firm-year-level panel data set and difference-in-differences as causal identification, we show that Chinese firms engage in party-building activities in the face of rising ideological control, with large firms showing more prominent response than small firms. We conduct further mechanism analysis to show their incentives: firms exhibit political loyalty as a means of self-preservation, but they also leverage such control measures to serve their interests. These findings elucidate the bilateral interactions between firms and the state in durable authoritarian regimes.