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Zhefeng Sun

DBA Graduate - 2019

Thesis title

Private capital invests in public service programs in China: the motivations and influencing factors


Shanmin Lechelle-Externe
Purpose This study aims to shed light on the intertwined relationship among pubic goods investment, public goods project earnings, and the overall performance of firms. Design/methodology/approach Based on the data collected from 319 Chinese firm, this study conducts an empirical research on the direct and indirect benefits of investing in public goods, using questionnaire survey and empirical testing methods, assisted by statistical tools Stata and R. Findings The findings of this study include: (1) A firm’s investment in public goods is significantly positively correlated with the overall earnings of the firm as a whole and the firm’s earnings from the public goods project it invests in, respectively; (2) being a state-owned firm, being a public firm, and being designated as a high-tech firm all have a positive – while being a real estate firm has a negative – moderation effect on the firm’s earnings from its investment in public goods; and (3) the firm’s earnings from its investment in public goods come not only from the relatively high direct earnings from the project, but also the long-term benefits brought about by the firm’s market social capital and market capability. Research limitations/implications This study highlights the significance of the long term benefit brought by public goods investment for firms, manifested in the growth of social capital and market capability. The main limitations of this study include: cross-section data may lead to indefinite causality between variables; subjective reviews may be tainted by cognitive bias; only one management member was surveyed for each firm, which could lead to incomprehensive depiction of the firm synthesized from the subjective assessment of the variables. Practical implications This research provides insights in the following aspects: for government to introduce fairer public goods investment policy, and to guide towards optimal pricing and quality of public service; for firms to improve its public goods investment mechanism, taking into account both business value and social value; for firms to better allocate their resources and balance between short-term, mid-term, and long-term returns. Originality/value This dissertation tests the classic investment theory with empirical study, and enriched the theoretical and empirical research on social capital and spillover effect. Keywords Private capital, investment in public goods, social capital, spillover effect, firm performance.