Competition Behind Competition: State-Sponsored Awards, Political Tournaments, and Corporate Participation in Poverty Alleviation in China

Abstract

Research has thus far suggested mixed effects of awards on the behavior of nonwinning firms. We draw from research on interorganizational spillover to study under what conditions state-sponsored awards motivate nonwinning firms to increase their efforts. We contend that, when government officials—an important institutional agent—are under competitive pressure from their own rivals to pursue the state goal, they are more motivated to promote the awards and trigger peer emulation, resulting in interorganizational spillover following the bestowal of awards. In turn, nonwinning firms with a greater need for government-controlled resources are more responsive to the spillover effect promoted by local officials. We test our theory with government awards to firms in China’s state-initiated poverty alleviation program. Analysis of Chinese publicly listed firms from 2016 to 2019 shows that following antipoverty award announcements, nonwinning firms improved their poverty alleviation effort more when their local government officials faced stronger competitive pressure in poverty reduction from their own close-rival officials. Notably, such spillover effects did not occur when local officials faced low competitive pressure. Our study contributes to research on interorganizational spillover and awards as well as how the state can encourage firms to tackle grand challenges.