Unrelated acquisitions in China: The role of political ownership and political connections Jakob Arnoldi 1,2 & Yulia Muratova 1,2 # Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract In this paper, we examine government influence on the acquisition behavior of Chinese firms. Drawing from the state capitalism literature, we test hypotheses regarding the effect of provincial government ownership and managerial ties respectively on industry relatedness of firm acquisitions. We furthermore test hypotheses concerning the moderating effect of institutional development and governor age and tenure. We test our hypotheses based on analysis of 346 majority acquisition deals completed by first- time acquirers in China between 2002 and 2014. Our results show that provincial government-owned firms and firms with ties to the same are more likely to conduct unrelated acquisitions within their home province compared to acquisitions across provincial boundaries. Similar patterns do not exist for privately owned firms or for firms with no managerial ties to provincial governments. Institutional development and governor age and tenure are found to have no moderating effects. We relate our findings to the main theoretical views of state capitalism and suggest that our results reflect government attempts to promote economic growth and social development. Our study contributes to the understanding of Chinese state capitalism and the cross-province barriers for business in China. Keywords Diversification . Acquisitions . Strategy . Political connections . China How government influences firm strategic behavior in countries with state capitalist economic systems is an important question which recently has received growing Asia Pac J Manag https://doi.org/10.1007/s10490-018-9571-2 * Jakob Arnoldi jaar@mgmt.au.dk 1 Department of Management, School of Business and Social Sciences, Aarhus University, Fuglesangs Allé 4, 8210 Aarhus V, Denmark 2 Sino-Danish Center, Eastern Yanqihu Campus, University of Chinese Academy of Sciences, 380 Huaibeizhuang, Huairou district, Beijing, China