Move to Success? Headquarters Relocation, Political Favoritism, and Corporate Performance

This study documents an unexplored corporate rent-seeking phenomenon in non-representative regimes—relocating headquarters (HQ) to the political center. Focusing on China, we find thatfirms that relocate their HQs to Beijing (the political center) enjoy increased political favors, butthose that move to Shanghai or Shenzhen (the country's two main economic centers) do not. Although both groups of movers experience improved profitability, their sustainable growthpaths diverge after relocating. Firm productivity and innovation worsen after relocating to Beijing, but improve after moving to Shanghai or Shenzhen. Overall, these findings support theargument that political favoritism benefits firms' profitability but impairs their productivity andinnovation