LAUSR

Abstract Researchers have extensively studied how large firms and SMEs use business and political ties to obtain tangible and intangible resources in transition economies. However, how SMEs establish these ties in the context of power-imbalanced dependence by using unethical and illegal “strategic practice” such as bribery remains underexplored. Furthermore, how SMEs deploy strategies to mitigate such risky actions in the process of resource acquisition is also given limited attention in the literature. Lack of exploration of these issues leaves significant gaps in our understanding of how SMEs are able to initiate and operate their ties for survival and growth despite enormous institutional constraints. We analyze the negative and positive effects of power dependence on business resource acquisition via regression analysis using survey data drawn from 232 Chinese SMEs. The findings indicate that power-imbalanced dependence among SMEs is associated with their use of bribery to establish political ties with officials for access to resources. The moderating effect of power-mutual dependence on this relationship is also examined. Theoretical significance and managerial implications of these findings for SMEs in transition economies are discussed.