LAUSR

ABSTRACT Using data on Chinese municipal party secretaries (MPS), we study whether firms prefer to pay more to officials who have a wider native place network. In doing so, we find the state-owned enterprises (SOEs) are more willing to pay for benefits from an official’s native place network. Furthermore, we investigate why firms pay for access to officials who have a wider native place network. On the one hand, as an important political social resource, officials’ native place networks enhance the probability of officials’ promotion. The firm is just buying a “political call option.” On the other hand, an MPS’s native place network can help firms to have more merger and acquisition activity. Using officials’ native place networks, this article provides a new angle on the effect of traditional culture on rent-seeking by firms.