Organizational responses to political sanctions: Voluntary state co-optation and strategic acquiescence in China’s futures market

What can an organization do to survive when its existence is a problem for political institutions? Drawing information from China’s futures market, we address this question through analysing forms of corporate political activity (CPA) among the nation’s ‘red capitalists’, notably using CPA concepts to decode power dynamics between Chinese financial organizations and the state. Deploying a multi-method, longitudinal and reflexive case approach, we explain how a ‘rogue’ futures exchange was targeted by a major regulatory crackdown, yet ostensibly survived; principally by negotiating new forms of institutional control. This saw the enrolling of state actors and resources to shape politically acceptable forms of corporate behaviour, a process framed theoretically through the concept of voluntary co-optation; or the strategic steps the focal organization took to yield power to the state in return for enhanced corporate legitimacy. Constructing a two-phase empirical account, including detailed diagrammatic explanations, the article assesses how a range of lobbying-oriented and guanxi-related practices influenced the organization in repositioning and reconstructing itself through progressive strategic acquiescence, as forces of political capital (‘whom you know’) and intellectual capital (‘what you know’) combined to shape the firm’s decision responses and bolster its functional credibility amid a hostile institutional climate.


Introduction
China's futures market has an ethnographic lifeworld largely unknown to western management scholars. This article studies a particular event in this world: how from November 2011 China's State Council took measures to crack down on hundreds of 'rogue exchanges' (Anderlini, 2011). The context for the research is a state regulatory offensive aimed principally at closing such exchanges, with the objective of the article being to explain how one such organization engaged in shaping various political strategies and tactics in order to survive (Contu et al., 2013;Hall, 1980;Meyer et al., 1990).
In the years following the 2011 crackdown, an internet search for 'China's futures market' would offer information reflecting a neat pyramid comprising one state regulator and four national exchanges. Only if searching for 'clean [ing] up and consolidat [ing] various types of trading venues' (Qingli Zhengdun Gelei Jiaoyi Changsuo) on Baidu, China's most popular search engine, would results reveal instead myriad locations for standardized commodity contracts dealing, with these essentially forming a grey area of 'quasi-futures' operations (Shen and Glenn, 2016). According to the China Securities Regulatory Commission (CSRC) (2016), the operations of such venues -policed by provincial governments -posed a high risk for investors, while consolidating them represented an ongoing task for the regulator.
The 'rogue exchange' we studied (hereafter 'Dragon Exchange', pseudonym) was a regional operator trading in a variety of 'quasi-futures', which are standardized commodity contracts, but crucially ones traded without a clearing house acting as a central counterparty, this being the core technical mechanism distinguishing 'futures' from 'quasi-futures' trading. In European markets, the latter are lawfully traded, being categorized by the International Swaps and Derivatives Association (ISDA) as 'Over the Counter' (OTC) contracts. However, China's 2007 futures regulation (SC, 2007) forbade trading in such 'variant' forms, with the result being that the incongruence between what the state considered formal and informal institutions in the futures market -the former taking recourse to explicit state regulations, the latter to implicit knowledge about normative practice in western markets -created space for a liminal sector to emerge: one where practitioners could maintain that such trading services were legitimate while simultaneously regulators could condemn them as illegitimate (Webb et al., 2009; see also Ang, 2020). We argue that identifying organizational control practices emerging in this contested space helps us comprehend crucial relationships between state politics and corporate strategy in China's financial services economy.
Regarding the background to our investigation, as an exaggerated method of institutional sanction, regulatory crackdown is an under-researched issue in management and organizational studies (Diestre and Rajagopalan, 2011;Lawrence, 2017). We argue, therefore, it is imperative to obtain greater insight into this area because the commercial world is increasingly contested over legitimacy issues (Jia, 2017;Joutsenvirta and Vaara, 2015;Suchman, 1995), with regulatory crackdown being deployed more commonly as a corrective procedure. Well-known crackdowns recently, for example, include those on Airbnb in New York (Newton, 2018) and Uber in London (Titcomb, 2015). Crackdowns tend to create hostile organizational environments: ones characterized by the holding of conflicting philosophies and assumptions among the main parties (Dupuy et al., 2015). As a result, among the responses that can emanate from sanctioned organizations are the promotion of informal and secretive processes in defence of corporate actions (Lawrence et al., 2013;Thornton et al., 2015).
Motivated to advance corporate political activity (CPA) research (Hillman et al., 2004;Lawton et al., 2013;Mantere et al., 2009) in an interpretive and reflexive direction (Koning and Ooi, 2013), this analysis offers a nuanced understanding of how sanctioned organizations conduct various forms of 'legitimacy work' to defend their strategies and operations during periods of institutional constraint (Costas and Grey, 2014). Specifically, we investigate how in the present case this operates in terms of two corporate promotion processes (Choi et al., 2014): enrolling state ownership as a form of political capital and developing in-house lobbying content as a form of intellectual capital. The goal is to explain their relatedness in strategic terms, and to do so through an empirical study of how forces of 'whom you know' and 'what you know' (Bertrand et al., 2014) can combine to boost enterprise validity and ensure organizational survival in a harsh and fluctuating institutional environment (Haveman, 1992;Marquis and Raynard, 2015).
The main contributions of the article are therefore two-fold: first, in relation to political capital; and contrary to received wisdom about how guanxi (the Chinese word for cultivating influence through networks and connections) operates -in particular, the 'connection for protection' (or 'whom you know') assumption (Chen et al., 2013;Li and Liang, 2015;Opper et al., 2016;Peng, 1997;Peng and Luo, 2000;Schuler et al., 2017;Xin and Pearce, 1996;Zhang et al., 2016) -we theorize a role for what we term 'voluntary' (or 'reverse') co-optation as a corporate political strategy. This concept explains how organizations, for strategic ends, can choose to be co-opted by the state; a process documenting progressive attempts by an incipient cadre of 'red capitalists' (Dickson, 2003;Du and Girma, 2010;Walter and Howie, 2012) to strategically 'wear the red hat' (Tsai, 2002;Whiting, 2001) in order to assist organizations in becoming 'state-favoured' enterprises (Fuller, 2016). Theoretically, we define voluntary co-optation in this scenario as the calculated trading of business equity to state actors to gain increased corporate legitimacy. We suggest that while ownership change can be accounted for in tangible, quantitative, terms, it can also encompass intangible effects that accumulate to provide qualitative change in organizational behaviour, and notably in relation to an enterprise's levels of autonomy and control.
Second, we document how intellectual capital -or 'what you know' -can provide vital currency for effecting such strategic repositioning, and in this case for renegotiating relationships between the organization and the state (Acemoglu et al., 2016;Blanes i Vidal et al., 2012;Gao and Huang, 2016;Hochberg et al., 2007). Our concept of voluntary co-optation suggests that 'what you know' can play a key role in enrolling 'whom you know'. We theorize how the in-house cultivation of intellectual capital not only facilitates an organization's enrolment into key strategic networks, but also serves to undergird the validity of its lobbying content. Through case analysis, we document how the focal organization achieved this through developing -in-house -institutionally valued knowledge-related resources; with these being accrued, for example, through talent recruiting, strategic researching and peer learning undertakings. In making these research contributions, findings are derived mainly from ethnographic research in the case exchange and historical analysis of events in China's futures market, with key arguments being summarized in a series of figures and tables.
The article is developed in four phases: first, we discuss the CPA literature on political and intellectual capital and in so doing generate two research questions. Second, we describe the research methods, data collection procedures and forms of enquiry. Third, we present an ethnographic, historical and reflexive account of how the focal organization dealt strategically and politically with a regulatory crackdown. Fourth, and finally, we reflect on insights gained from the investigation in relation to our concept of voluntary co-optation, hereby informing theory development and empiricism in CPA.

Political capital and CPA research
The development of political connections (or 'whom you know') -the first empirical focus of this article -is a central concern for CPA scholars (Barley, 2010;Haveman et al., 2017;Yu et al., 2008). CPA theory suggests businesses can benefit from obtaining political capital of various forms, for example, building guanxi with government officials, hiring former officials or federal employees and hosting visits by high-ranking bureaucrats (Chen et al., 2013;Li and Liang, 2015;Opper et al., 2016;Peng, 1997;Peng and Luo, 2000;Schuler et al., 2017;Xin and Pearce, 1996). The notion of political capital has been used to explain organizational performance in studies highlighting mediating effects such as firm size, industry dynamics, geographical location and political infrastructure (Jia, 2016;Luechinger and Moser, 2014;Luo et al., 2012;Okhmatovskiy, 2010). Research has thus frequently focused on economic, financial, environmental and policy-oriented outcomes.
Centrally, hypotheses relating to guanxi have often assumed the notion of 'connection for protection', suggesting the achievement of reduced environmental uncertainty for organizations that engage meaningfully with government and enlist its support (Gold et al., 2002;Keister, 2002;Wank, 2001). Other research, however, has illuminated the often complicated, ambiguous and dynamic relationships between firms and government in this regard (Den Hond et al., 2014;Jiang et al., 2016;Suhomlinova, 2007;Wilson, 2009). In politically contested fields, for example, the skilful manoeuvring of ideology can be realized through processes of rhetorically intense argumentation, elite political networking, coalition-building and cultivating officialdom, with these factors all relevant to explaining the dynamics of CPA.
In the context of China's economic expansion, research on the nation's 'red capitalists' suggests that engaging in the fostering of 'connection for protection' relations can be strategically risky, as government policy may readily break as well as make businesses (Dickson, 2003). A shorthand definition for red capitalists is Chinese entrepreneurs with close personal and political ties to the 'Party' (Communist Party of China, or CPC) (Dickie, 2005). With the activities of red capitalists in mind, we argue that as state and market become increasingly enmeshed in modern China, the 'connection for protection' hypothesis requires deeper, richer and more grounded explanation than hitherto realized. We argue further that this hypothesis is generally applied to two types of red capitalists: private entrepreneurs who 'joined the Party later' and former government officials who 'exited the Party apparatus' and started private businesses (Walter and Howie, 2012). However, in this research we identify a third type whose actions are not so well documented -senior management of State-Owned Enterprises (SOEs: see Butzbach et al., 2021;Lazzarini, 2014, 2018) -with the study assessing their role in the strategic repositioning case presented. In China, SOEs are administratively ranked organizations, with their remit straddling two institutional spheres: state and market (Hassard et al., 2007(Hassard et al., , 2010Jing and McDermott, 2013;Lin, 2017;Ralston et al., 2006), a situation that sees them adhere both to political and economic objectives (Huang, 2002;Morris et al., 2001;Steinfeld, 1998). Thus the 'connection for protection' hypothesis cannot explain easily how political strategy -especially co-optation -operates for this institutional cadre, owing to the mixed ownership status of many organizations (Jones and Zou, 2017;Maynard et al., 2019).
In China's modern history, Rong Yiren and Wang Guangying are probably the most prominent red capitalists. They were de facto controllers of two exceptionally large SOE conglomerates -CITIC and Everbright -and both individuals held high political status in the Party (Chan, 1996;Dickie, 2005;The Economist, 2005). Indeed, they shared similar personal trajectories in terms of their Party relations. Before 1949, both were owners of large family businesses in Nationalist China and after 1949 both voluntarily traded their business equity to 'new China'. Hence, they were treated as the Party's political allies rather than 'class enemies' (Dickie, 2005). Additionally, they were soon reappointed to leadership positions in their respective businesses, which by now were nationalized. During the era of economic reform and 'opening up' (post-1978), both businesses expanded rapidly within China and established significant operations overseas. By 1999, Rong and Wang were among China's '50 Richest Businessmen' (as calculated by Forbes), with Rong the richest. In short, their biographies suggest the expropriation of assets can be used by private business owners voluntarily as a co-optation strategy, one that can yield long-term business benefits, albeit as part of a rather circuitous politico-economic logic (Apriliyanti and Kristiansen, 2019).
Classical sociological literature on political activity in organizations has indeed defined co-optation as 'the process of absorbing new elements into the leadership or policy-determining structure of an organization as a means of averting threats to its stability or existence' (Selznick, 1949: 13). Additionally, in relation to adapting to external contingencies through constraint absorption (Pfeffer, 1972;Pfeffer and Salancik, 1978), more recent work on co-optation has focused on power imbalances and mutual dependence and illustrated how powerful state apparatuses, and in our case the Chinese government generally, can function to obtain stakes in economically and politically dependent organizations (Casciaro and Piskorski, 2005; see also He et al., 2016), a resource dependence process with clear links to our notion of 'voluntary' co-optation. Such analyses, however, primarily take the state as the initiator of such processes and rarely consider what might be termed 'reverse' co-optation, when organizations may seemingly choose to become absorbed by government institutions for their own ends. Organization theory has therefore seldom, if ever, contemplated 'voluntary co-optation' as a dedicated conceptual category: where an organization can strategically relinquish equity in exchange for legitimacy and stability during periods of environmental upheaval. We theorize that this is exactly what Rong Yiren, Wang Guangying and the organization we studied, opted to do. In the case of our focal organization (Dragon Exchange), both before and during the period of crackdown senior executives and the board had agreed on a policy of inviting senior ranking SOEs to invest in the enterprise. This resulted not only in significant changes to the ownership structure and senior management of the organization, but also in changes to Dragon's relationships with other corporate and institutional actors. In China's 'unofficial' futures market, however, Dragon was not alone in seeking such cooptation, for many other 'targeted' trading venues attempted to pursue a similar strategy around this time.
Owing to its conceptual and empirical understatement in the CPA literature, we argue it remains unclear how our focal concept of voluntary co-optation functions as a strategy 'on the ground', especially in terms of nuanced analysis of relations between political capital, intellectual capital and organizational control. With much of the literature focusing on economic, financial and thus largely structural explanations, we argue the effects of voluntary co-optation at the level of the organization remain unclear. Central to this investigation, therefore, is how such forces and factors can be illuminated in qualitative, interpretive and specifically ethnographic, terms. Thus, a first question that motivates the research is 'in political terms how does voluntary co-optation function as a strategy for enhancing organizational legitimacy?'

Intellectual capital and CPA research
The second concern is how central is intellectual capital (or 'what you know') to facilitating political activity in the cause of achieving strategic repositioning. In this regard, lobbyists are often portrayed as experts with influential roles to play, being singled-out as individuals having the resources and capabilities to develop knowledge in vital political areas (Bertrand et al., 2014). Indeed, providing information to influence, for example, policy-making regulators -directly, indirectly or through intermediaries -is fundamental to understanding political relations between organizations and the state (Funk and Hirschman, 2017;Kennedy, 2005Kennedy, , 2009. We argue that the development of intellectual capital is not a passive issue for those theorizing CPA, but rather one that can be framed multifariously in the manipulating of perceptions by elites, experts and officials (Ferris and Kacmar, 1992;MacKenzie et al., 2007;Reed, 2012;Zald and Lounsbury, 2010), with influencing being achieved through various sense-making means (Maitlis and Christianson, 2014;Stacey and Brown, 2008;Whittle et al., 2014). Theoretically, evaluating intellectual contribution exclusively in monetary terms is wanting because knowledge work is dynamic and can influence organizational performance in diverse ways (Tseng and Lee, 2014). Indeed, while research in CPA has developed measures to evaluate intellectual contribution in financial terms -by calculating, for example, lobbying expenditures or campaign donations (Borisov et al., 2016;Kang, 2016;Ridge et al., 2017;Rivera and Patnaik, 2017) -data for such computation is often inaccessible when lobbying effort involves tacit, unofficial or even secretive practices: activities accorded questionable legitimacy status (Ang, 2020;Costas and Grey, 2014;Lawrence, 2017;Webb et al., 2009). During regulatory crackdowns, researchers have hypothesized that one option for organizations is to cultivate knowledge acumen and develop intellectual capacity in-house (Jia, 2017). This is because, when classified as secretive, illegal or illegitimate, the confidences of trading can become 'vulnerable' (Costas and Grey, 2014), while potential costs must be minimized owing to the significant 'uncertainty of outcomes' (Ozcan and Gurses, 2017). Hence, in circumstances where the outsourcing of lobbying is not practical, or deemed unpredictable for gaining economic return, 'alternative' tactics must be employed to achieve content legitimacy (Jia, 2017).
Relatively little is known, however, about how organizations employ such tactics in uncertain or unstable environments. Krug and Hendrischke (2008: 98) argue that guanxi can represent a 'transaction cost saving device' in the sense it characterizes the actions of 'active business networks around economic assets', with membership of such networks defined by the 'ability to contribute' legitimately in uncertain times. This suggests intellectual capital can play a significant role in facilitating enrolment into valued strategic associations through 'strategifying' practices (Gond et al., 2018; see also Reed et al., 2006). Extant research though has mainly focused on tactics related to personal status and social relationships for achieving network enrolment, and thus on issues such as kinship, friendship, 'revolving doors' and 'old school' connections (Feeney and Bozeman, 2008;Guan and Frenkel, 2018). In contrast, less is known about the role of internal organizational factors as means for promoting the expansion and cementing of political alliances, such as through generating competence in knowledge work or engendering capabilities in strategic planning. Thus, for securing voluntary co-optation, a second question for this research is: how does corporate cultivation of intellectual capital facilitate network enrolment through enhancing the legitimacy of lobbying content?

Methods and analysis
We have now formed questions to help us understand what an organization can do to survive when its existence is a challenge to dominant institutions. We have also suggested that to fill gaps in our understanding of CPA in China's futures market, detailed and especially grounded knowledge is required of an organization undergoing strategic repositioning to augment its legitimacy. Our position is that this can be achieved by a researcher becoming an 'insider' of such an organization. This research therefore has represented a process of 'getting close' to a sector largely unknown to western management scholars: China's 'quasi-futures' market, as defined by the 2007 iteration of China's futures regulations. To this end, the most appropriate research approach has been deemed ethnographic inquiry, and specifically use of participant observation (Alvesson and Sköldberg, 2009;Van Maanen, 2011a). However, in addition to collecting data via ethnography, information on the case was gained from interviews with executives and senior officials, followup communications with participants (over several years), desk research and documentary analysis relevant to understanding key events. These latter sources were valuable for supplying both historical information on China's futures market and contextual information on the recent corporate fortunes of the case organization.
In terms of the main research method, ethnography, the process whereby the fieldworker gained 'insider' status to the case organization was as follows. Following pilot interviews on China's futures trading with a Dragon senior executive in January and July 2011, the researcher was invited to join the enterprise to help build strategic partnerships with foreign financial organizations (FFOs). This meant that from September 2011 to August 2012 she was contractually employed by Dragon as 'Manager of Strategy Development' (Strategy Manager hereafter). During the negotiations for this position, an agreement was reached for her to conduct, simultaneously, observational research on the enterprise, its personnel and activities. It was during the early months of this arrangement that the regulatory crackdown that forms the context for this study occurred, in November 2011, with Dragon being one of the exchanges targeted.
During the period of ethnography, the fieldworker adopted a reflexive approach to data collection. Thus, in addition to making daily observations of events, meetings and so on, she recorded personal reflections on the proceedings experienced and actions taken (Cutcher, 2020;Gilmore and Kenny, 2014). In negotiating the ethnographic access agreement, the researcher signed a non-disclosure agreement with the company in which it was agreed that no person or organization would be identified to the public, including in academic publications. In addition, there were numerous email exchanges where the researcher explained the purposes and ethical nature of the inquiry to the Chief Operating Officer (COO).
By remaining in the field during a difficult period for the exchange, the fieldworker not only demonstrated commitment to the organization but was also -owing to a dual manager/researcher role -active in developing many of the organization's responses to the crackdown. In being closely engaged in the exchange's affairs, she felt progressively 'accepted' by the organization and its staff, with this serving to reduce the level of psychological distance experienced between researcher and researched (Ghorashi and Wels, 2009). This proved useful on occasions where the researcher was involved in informal interactions but still wished to collect information, for example, during business travel; when dining with colleagues, clients and officials; or when engaged in casual businessrelated discussions. These occasions often presented opportunities to access the perceptions of 'outsiders' (Dwyer and Buckle, 2009) or 'others' (Jones, 2014), and frequently in ways that widened the empirical focus, for example, when the views of executives from rival exchanges were gathered.
During the fieldwork, data were collected in both written and digital forms. Written fieldnotes were assembled in six notebooks; four recording observations from the 12-month period of ethnographic research, and two detailing information from the 26 in-depth interviews (Guest et al., 2013). Interviews typically lasted between 45 and 75 minutes and focused on issues relevant to the two core research questions. Semi-structured interview schedules were prepared in advance of each session, with in addition to key topics a number of prompts being constructed to stimulate further discussion. Although interview sessions typically covered the majority of research topics specified this was rarely accomplished in the order set. Given the nature of the research (longitudinal, multi-method, twin case) and parameters of this article (word count, pages), we offer ethnographic and interview materials mainly in narrative form; rather than reproduce lengthy fieldnotes and quotations. In addition, much information was collected in digital form, including 12GB of audio recordings, photographs, screenshots, working documents and secondary information. In handling these materials, the emphasis, likewise, was to examine and interpret them in order to elicit meaning, gain understanding and develop empirical knowledge (Strauss and Corbin, 1998). As we assembled information via a combination of qualitative methods, the research process arguably offered a degree of methodological triangulation (Denzin, 1970).
Given the variety of data forms, ethnographic assessment was based on thematic analysis, but without recourse to a qualitative software package (e.g. Nvivo; see Nowell et al., 2017). Instead, analysis involved three traditional stages of processing qualitative information: description, conceptual ordering and theorizing (Geertz, 2005). The first, description, commenced with assembling case information chronologically and then writing ethnographically 'thick' observations of events (Van Maanen, 2011b). This transformed largely disorganized experiences into organized evidence and served as a repository for later analytical stages. Organizational events were thus described in tandem with the evaluation of secondary material collected from media reports and desk research. As the fieldworker's role meant her work for Dragon mainly concerned external affairs, she rarely dealt with internal matters, although access to such information was made available. In describing activities relevant to Dragon's CPA, the fieldworker's duties included: collaborating with regional government on developing local financial infrastructure; collaborating with regional government on planning the regional trading group; building strategic partnerships with FFOs; researching and developing trading model theories; lobbying through working with think-tanks; and facilitating learning between regional officials and foreign organizations.
The second stage of analysis concerned conceptual ordering, or developing higherorder descriptions of emerging themes (Strauss and Corbin, 1998). At this stage, such themes are not so much theoretical concepts as narratives explaining the meaning of events. Important themes arising from the ethnography and interviews were identified from the authors' analyses of fieldnotes and transcripts, followed by cross-checking with colleagues. This reflected a theoretically 'grounded' (Glaser and Strauss, 1967) approach leading to the emergence of conceptual categories, a method aligned with the assumptions of 'interpretive' enquiry (Bryman and Bell, 2011). Through this approach, it became clear that two thematic networks -reflecting issues of political capital and intellectual capital respectively -were key to explaining the case, with associated narratives forming the nodes of these networks, a process giving the empirical enquiry content and form. For example, intellectual work was important in all the fieldworker's tasks and she observed how her work, and that of other actors, could be directed at developing informational capacity to cope with changing political circumstances. To this end, the development of a new trading model theory was a task 'staged' for the purpose of lobbying; for a previous model had to be quickly phased out in light of political forces working to its discredit. Elsewhere, building strategic partnerships with FFOs involved absorbing knowledge from foreign partners, and thus using their knowledge bases to support those of Dragon. Additionally, for lobbying through think-tanks, the exchange was the supplier of knowledge and expertise, whereas, for planning the regional trading group, multiple stakeholders contributed intellectually to its development. Thus, in responding to external events, various resources were mobilized to promote the exchange's intellectual work, with the second phase of analysis identifying network relations that illuminated their significance.
The final stage concerned construct development. Based on information obtained in the first and second stages, this saw descriptive materials underpin thematic interpretations of conceptual significance. It was from this process that we concluded the key political strategy unfolding was one of 'voluntary co-optation', with our theorizing reflecting relationships between political strategy and organizational capability, as Dragon responded to the crackdown through the in-house cultivation of intellectual capital. Indeed, as we analysed the information -narrative by narrative, theme by theme, level by level -the relating of empirical events and theoretical constructs came to clarify organizational responses to institutional sanctions. Figure 1 therefore illustrates the thematic building blocks upon which the analysis was founded, with theoretical development being realized through progressively constructing networks of 'whom you know' and 'what you know' relationships. The figure explains how in describing Dragon's CPA, voluntary co-optation operated in parallel to forces underpinning the in-house cultivation of intellectual capital, the result being strategy reflecting how forces of political and intellectual capital evolved mutually to realize a response to formal sanctions amid a major regulatory crackdown.

Context: China's futures market and state crackdowns
To understand the case, it is necessary to place the key issues in historical context. The event that motivated the study -the Chinese government's 2011 crackdown on 'rouge' futures exchanges -was described in government decree No. 38 (SC, 2011) as 'clean [ing] up and consolidat[ing] various types of trading venues'. As the Financial Times (FT), Beijing, reported, it targeted over 300 'unregulated electronic equity and futures exchanges that have sprung up in recent years, trading everything from fine art and commodities to insurance products' (Anderlini, 2011). The crackdown was originally interpreted by futures exchanges as resulting from the State Council's determination to 'bring the market back to order' (Anderlini, 2011).
It was indeed expected that the State Council would close most 'rogue' exchanges, including that researched, Dragon Exchange. 1 This seemed logical given the recent history of China's futures markets. In 1994, following an official crackdown notice the previous year (SC, 1993), the State Council consolidated more than 50 futures exchanges into 14 (SC, 1994), and in 1998 consolidated the 14 into three (SC, 1998). Closed exchanges were converted into either futures brokerage companies or regional trading rooms of the remaining three exchanges. The State Council then placed the three commodity exchanges under CSRC control, terminated an experiment with financial futures and required ministries and regional governments to withdraw their stakes in futures exchanges (Chang, 2007;Siu, 2010). As such, the crackdowns of the 1990s consolidated the market considerably.
However, when the 1990s crackdowns are contrasted with that of 2011, interesting comparisons can be drawn. While those of the 1990s largely severed political connections between futures exchanges and their political patrons, the 2011 crackdown led to a tiered arrangement where four CSRC-regulated exchanges formed a national market.  Still, many regional venues for standardized commodity contracts continued to operate. Although the CSRC recognized the risk some regional trading venues posed to investors, it accepted the authority of provincial governments to regulate local financial markets. Speculation on what had changed suggested the onset of a more liberal attitude on behalf of central government, coupled with greater capacity of regional government for developing financial markets that could serve local interests effectively.
In the wake of the 1993 and 2011 crackdown notices (SC, 1993(SC, , 2011, Implementation Opinions (IO) statements -published by the General Office of the State Council (SC, 1994(SC, , 2012) -clearly illustrated central government's changing attitude towards the futures market. In the 1994 IO, the State Council identified 'illegal activities' in the organization of futures trading (SC, 1994), stipulating that central government should retain authority for approving futures exchanges while provincial government and ministries -other than those with financial regulatory duties -must withdraw. In contrast, the 2012 IO statements listed six types of trading activities that needed 'rectifying'. Nevertheless, they did not categorize any as 'illegal' (SC, 2012), reiterating that responsibility for regulating regional financial markets -and leading the crackdown -remained with provincial governments. The CSRC and the (CSRC-led) Inter-Ministry Joint Conference (hereafter IMJC: a taskforce established by the State Council for implementing the crackdown at national level) then assumed responsibility for reviewing and approving proposals by provincial governments, an essentially light-touch approach compared with the 1994 stipulations. The technical analysis of futures market organization contained in the 1994 and 2012 IO statements also reflected how state knowledge of the futures market had become more sophisticated over the years. While the 1994 IO statements listed only basic requirements for the organization and control of a futures exchange, those of 2012 described complex arrangements regarding futures, forwards and other standardized commodity contracts, as well as detailed prescriptions for forms of market making and centralized trading.
To outline the evolution of China's futures market, we have constructed Table 1, which provides a chronological appreciation of major events and regulations. The table is based on information collected from the Futures Daily (a newspaper dedicated to the development of China's futures market), Hexun Futures (the most popular online news portal for futures and spot trading) and the websites of the CSRC (the regulator) and the China Futures Association (the industry association for self-regulation, supervised by the CSRC). Considering this chronology, it is possible to contrast both the 'official' and 'unofficial' nature of the market structure. The analysis presented mainly focuses on events from 2007, when unregulated trading venues for quasi-futures emerged. By 2013, however, media reports were suggesting the crackdown had brought the closure of more than 200 such venues, with the remainder coming under the supervision of provincial or ministerial governments (Cao, 2013).
Importantly, the events-based analysis comprising Table 1 provides an overview of market developments in relation to political regulation, including state crackdowns. Notable is the dissemination of three iterations of official stipulations for the 'Regulation on Futures Trading'. The 'Interim' provision was published in 1999, when the 1990s crackdowns concluded, but it was relatively underdeveloped technically and failed to Commodities on the Spot Market (for trial implementation). December, the CSRC announces that the crackdown was generally concluded, noting that cleaning up and consolidating various types of trading venues was one of its longterm tasks. 2016 The CSRC responded to media questions concerning the crackdown, noting some trading venues that were regulated by provincial governments were of high risk to investors.

(Continued)
Time Event 2017 January, the IMJC held the third conference -for 'Looking back' at the crackdown. May, the IMJC held a working party meeting to review the progress of 'Looking back' and stated that within a single province or municipality only one trading venue was allowed for a certain type of commodities or securities. The others must be closed or consolidated. 2018 March, the IMJC held a follow-up meeting to review and strengthen the crackdown measures. September, the IMJC held a special topic working meeting to strengthen the crackdown measures. 2019 July, the IMJC held the fourth conference -to deploy further crackdown measures. provide clear and definitive recommendations for institutional change. The 2007 iteration, however, provided clearer definitions of futures and futures exchanges and included a supplementary clause on 'variations of futures'; albeit one in which the boundaries between 'futures' and 'quasi-futures' were somewhat blurred. This was noted by the CSRC and the Legislative Affairs Office of the State Council in a press release in the wake of the 2012 iteration, which provided more technically defensible definitions for assessing futures and the operations of futures exchanges. Markedly, this delineated the role of a central counterparty clearing house (CCP) along the lines recommended by international organizations IOSCO, 2004, 2012). Although China already utilized a clearing facility for its four national futures exchanges, it had failed to incorporate any technical definition of a CCP in stipulating futures operations (Dang, 2004;Hu and Sun, 2009). Hence, despite the 2012 iteration making technical progress, the task of distinguishing futures from other types of standardized commodity contracts remained difficult.
By 2015, trading volumes of the four national futures exchanges had reached approximately US$85 trillion, up almost 90% from 2014 according to the China Futures Association (CFA). Additionally, in July 2016, Reuters reported that (at end-2015) China's annual 'spot' commodities trading volume (on more than 350 independent exchanges) had reached US$4.5 trillion, with trading volume growing by approximately 35% annually from 2011 to 2015 (CNBC, 2016;Shen and Glenn, 2016). Also, in the Reuters report, a statement by their lawyers showed just how turbulent spot trading had become, suggesting such contracts now 'offer high leverage, change hands frequently and are not for the purpose of actually taking delivery of products -characteristics of futures rather than spot trading' (Shen and Glenn, 2016). Given the uncertainty surrounding futures trading, in July 2019 the CSRC and the IMJC held the fourth national conference to discuss crackdown measures. 2 It suggested the crackdown of 2011 had not concluded, although it was widely held that the third conference (held by the IMJC in January 2017) had significantly reduced the number of trading venues. In fact, a target was now set, in that each province or municipality should have only one trading venue for a certain type of commodity or security. 3 The politico-economic evolution of China's futures market has therefore been complex. It reflects a complicated history of recommendations, regulations and stipulations in connection both to 'official' and 'unofficial' representations of the market. Given the  degree of complexity and controversy involved, in Figures 2 and 3 we have attempted to explain the 'image' and 'reality' of futures trading, with this information reflecting the situation five years after the 2011 crackdown. On viewing these figures, the official pyramidal market structure (Figure 2) is simple -comprising the central CSRC apparatus plus four exchange operations. However, this only tells part of the story. When we also consider trading venues targeted by the 2011 crackdown but which continued to exist, the de facto structure of China's futures market is far more complex than officially defined (Figure 3). Important to note here is that most surviving venues had connections with provincial governments, municipal governments, ministry authorities or SOEs. Figure 3 thus outlines the elaborate networks constructed between trading venues and political patrons in a model assembled from publicly available sources (e.g. Hexun Futures, Futures Daily, government websites, venue websites). This information, which we now analyse in tandem with ethnographic evidence, indicates that regions usually comprised three or four exchanges surviving the crackdown, while major cities had far more; Shanghai, for example, had 38 venues approved by the IMJC (Luo, 2014) and Beijing, 35 (BJJRJ, 2013).

Political capital and intellectual capital
As noted, the first thematic contribution to case analysis was conceptualizing issues of political capital. Understanding China's futures market involves understanding the strengths and weaknesses of various forms of political connection in respect of how an organization can, for example, strategically relinquish equity in exchange for legitimacy. Dragon's network of relationships contains various forms of political capital, with these reflecting how the exchange obtained bounded resources and achieved institutional legitimacy. However, while a specific form of political capital -state ownership -ostensibly sustained the exchange during a major regulatory crackdown, a second thematic contribution saw forms of intellectual capital also underpin the courting of political patrons to establish organizational validity. Important to note here, for example, is the expansion of Dragon's intellectual capacity in relation to the regional development of financial infrastructure. This illustrates how the in-house cultivation of intellectual capital came to augment Dragon's authority more broadly in the direction of achieving voluntary cooptation by the state. Based on thematic analysis, therefore, Dragon's CPA can be explained through contrasting issues of 'whom you know' and 'what you know' relations, a process seeing CPA mirrored in two interpretive vignettes: (1) portrayal of an organization dealing strategically with institutional sanctions, and (2) reflexive analysis of the in-house cultivation of lobbying content.

Whom you know: Managing sanctions through voluntary co-optation
From the start of the 2011 crackdown, Dragon sought state recognition that it was not a 'rogue' exchange, but instead an innovative and competent financial organization. To this end, it needed expertise and credibility to articulate a positive message ('what you know') and effective channels to deliver the message to key decision makers ('whom you know'). Dragon used various intermediaries to promote its strategic message and lobbied directly when the opportunity arose, although the impact of such actions varied significantly. Nonetheless, enrolling of powerful political patrons brought with it the imposition of new and robust forms of supervisory control, a situation ultimately weakening the exchange's level of strategic autonomy.
By 2014, it was thought Dragon had survived the crackdown but may need to modify its trading model to gain final approval from the CSRC-led IMJC. At that time, the exchange had become state controlled, as its level of state ownership now exceeded 75%. The largest of its state owners -which effectively controlled the organization -was a ministerial-ranking SOE and state ownership seemed to provide confidence that Dragon was unlikely to engage in 'rogue' forms of behaviour for short-term profitability. Moreover, in the ensuing years the Party newspaper reported positively on Dragon and its new president's commercial activities, thus seemingly endorsing the organization's legitimate contribution to China's economic reform.
To understand Dragon's political and strategic repositioning, Figure 4 offers a simplified illustration of the exchange's network of relationships before it became state controlled, with solid lines representing direct relationships while dashed lines those that were contingent or indirect. Dragon was at this time fundamentally a trading venue regulated by regional government under the auspices of the local Financial Development Office. Meanwhile FFOs, think-tanks and media (traditional and social) were intermediaries through which the exchange could incidentally deliver its message to policy makers.
Among these intermediaries, however, only think-tanks operated like western lobbyists in relation to building political capital. During the period of ethnographic research, the fieldworker worked with three think-tanks on behalf of Dragon. In meetings, thinktank members would promise, for example, that key messages would be delivered to major policy makers, in the process naming powerful individuals. One member of a think-tank suggested to the fieldworker for instance: Your report will not be handed to [  will make sure each document receives his comments and responses . . . This way your report is guaranteed to receive his attention.
Those at the apex of think-tanks were variously former state officials, consultants to international trading groups, or advisers to China's regulators -actors not currently holding government positions but who had extensive political connections. Such individuals did not create intelligence: they merely offered channels through which information generated internally by Dragon could be processed. Indeed, during the period of participant observation, the fieldworker did not detect any significant direct impact made by thinktanks on behalf of Dragon, as instead mainly indirect influence was realized, such as publishing in the securities media. Rather, the body responsible for producing information for think-tanks was the exchange's own Research Department, while assistants of Dragon's Chief Executive Officer (CEO) monitored social media and responded to it when necessary.
In contrast, the role FFOs played in shaping Dragon's CPA was in straddling the spheres of political and intellectual capital. They were considered a channel of political resource not only because they could lobby the Chinese government directly, but also owing to the unique relationship they had developed with the state. When it was difficult to establish direct political connections with ministries or institutions of central government, the exchange's strategy was to build relationships with FFOs held in high regard by government officials. During the decades of building China's markets, including financial markets, government officials often claimed to have benefitted from their interactions with FFOs; with these ranging from receiving delegates from, to undertaking training by, a financial organization based, for example, in London, New York or Chicago. Even the practice of merely mentioning Dragon's links to reputable FFOs could provide, in some circles, a degree of 'reflected glory' for an exchange. Indeed, developing relationships with FFOs was considered of such strategic importance to Dragon that it became one of the fieldworker's main priorities as Strategy Manager.
Nevertheless, as we discuss below, it was Dragon's primary political patron, regional government, the body that initially invested in the exchange, which represented the organization's formal 'whom you know' communication channel to central government and its policy makers. Regional government was of crucial importance to Dragon in that it could defend the exchange against political opponents. The strength of regional government's power was principally its geographic jurisdiction, for central government ministries needed provincial government coordination to impose regulatory sanctions, a political norm in China (Huang, 2002;Oi, 1995). Also, regional government could combat ministerial offensives because the regional governor was often of the same rank as political adversaries in central government.
Meanwhile, Figure 4 highlights two additional guanxi-related factors in Dragon's network of institutional relationships, ones the exchange felt were often particularly difficult to predict and control. These are represented by the two central boxes: personal networks and ad hoc encounters with policy makers. Despite the CPA literature implying that guanxi can substitute for an institutional void, and thus reduce organizational uncertainty (Gold et al., 2002;Jia, 2016;Xin and Pearce, 1996), these factors could often represent unreliable sources of political capital for the exchange. Lobbying through personal networks, or during ad hoc encounters with state officials, could mean being at the behest of several contingent forces, owing to the high level of informality involved. In such situations, Dragon often had little control over how a case would be argued, how arguments would be delivered or what the ultimate corporate consequences might be. In terms of how this affected Dragon at this time, it potentially introduced high levels of ambiguity and opacity to a situation requiring clarity and stability.
In 2012, for instance, Dragon's political situation became more complex when a ministerial-ranking SOE (DL Group) entered its corporate orbit. Notable here was that DL's CEO was an old friend and ex-colleague of a senior Dragon board director, Mr H. During what became a proposed takeover of Dragon by DL, the fieldworker discussed the issue with colleagues and with H himself. What emerged was that H not only had significant influence over one of the exchange's major private stakeholders (anonymous), but was also a figure considered prominent in Chinese overseas investment, generally. In addition, H was ever-present in Dragon board meetings and influential when major strategic matters were being discussed and decisions reached. Thus, it was not surprising that H asked his old friend to make positive comments about Dragon during the latter's dealings with the State Council. However, as fieldnotes from the time indicate, there were always risks to personal networking and ad hoc encounters of this kind, for Dragon could not always calculate or manage the outcomes from such political-institutional lobbying: Although Mr H said he did not explicitly invite the DL Group to invest, I recall in previous board meetings we discussed inviting organizations of high rank to do so. He said he simply asked DL's CEO to put in a good word for Dragon, since the latter had good working relations with the State Council. This request, however, lacked any specific aims or expectations. So, when DL's CEO attempted to fulfil his promise to his old friend, he was challenged by one of the senior officials as to his motives for speaking on behalf of Dragon. H explained that the challenge indicated suspicion of a corrupt relationship between the exchange and DL's CEO. To counteract this potential charge, the CEO had to improvise a rational motive other than his good personal relationship with H. As such, the CEO claimed the affiliation was part of DL's development strategy, for the Group had important business lines in products traded on Dragon Exchange. Indeed, having a trading platform for its products would potentially provide DL with greater pricing power. Perceiving most state officers would likely support this rationale, the senior official in question accepted the explanation. Consequently, the CEO escaped censure, with the result that the acquisition of Dragon by DL was now firmly on the agenda.
When, during 2013-2014, the fieldworker consulted former colleagues about the ramifications of this takeover, it appeared Dragon had initially welcomed DL, for the acquisition could improve the organization's political status, its perceived legitimacy with government and ultimately its chances of survival. In this case, the long-established relationship and mutual respect between Mr H and DL's CEO, together with Dragon's technical capacity in trading, were central, on the one hand, to the exchange strategically enrolling DL, and on the other to DL making a convincing case for acquiring Dragon. The interplay of personal networks, political norms and technical know-how therefore began to highlight the potential of voluntary co-optation by the state as an alternative, if potentially risky, political strategy when forming an organizational response to formal institutional sanctions.
It is important to re-emphasize at this point that SOEs like DL have formal administrative rankings, a phenomenon that persists in China despite incremental reform (Eaton and Kostka, 2017). From high to low, central government-controlled SOEs are classified level-wise as provincial-ministerial, sub-ministerial level and bureau (Hassard et al., 2007). SOEs supervised directly by the State Council are mostly provincial-ministerial organizations, while those controlled through the State-owned Assets Supervision and Administration Commission (SASAC) are mainly sub-ministerial or bureau level. Regional government-controlled SOEs are of lesser rank (from high to low: bureau, subbureau, divisional and sectional levels). In Table 2, we see how Dragon's level of stateenterprise control increased by proportion and rank over time. It also shows how greater state-enterprise control saw senior ranking officials increasingly deployed to represent SOE interests. Dragon was founded by a divisional ranking SOE controlled by regional government; one initially expressing only relatively minor interests in the exchange's affairs. This divisional ranking SOE had one director on Dragon's board and a junior executive in charge of a non-core function. Although the region's Financial Development Office (FDO) enjoyed a reasonably close relationship with the exchange and its operations, the director in question rarely interfered in day-to-day business matters.
However, when in late 2011 a bureau-level SOE (CG group) invested, it soon installed a more active board director, notably one with experience in organizing trading platforms, hence someone with professional interests in the exchange's business affairs and who subsequently participated keenly in strategy meetings. The following year, when (ministerial-level) DL group became involved, it went further and began to appoint a new board Chairman, replace Dragon's CEO and COO with a president and vice-president, and introduce two senior executives to manage core functions. DL thus started to change key Dragon personnel and subsequently the exchange's strategic policies, with many stakeholders feeling unintended consequences from the acquisition were becoming apparent. As a result of these changes, which mainly occurred in 2014, Dragon ostensibly survived the regulatory crackdown. However, it was now difficult to discern whether the organization had won several tactical battles while losing the broader strategic war. Undeniably, key actors at the exchange had fought hard to bolster its corporate legitimacy in face of uncertainty, but whether Dragon was now anticipating better longterm prospects commercially was extremely moot. For CPA research, therefore, this vignette illuminates how a key patron's level of commitment and rank is crucial when corporate legitimacy is dependent on political capital. However, in addition to considering the forms of political connection or amount of political heft an organization can muster, it is also important to appreciate the unintended consequences that can arise in such situations, for example, in relation to decision-making autonomy and strategic control. Political patrons have strengths and weaknesses and corporate actors need to consider these carefully when devising political strategies. Importantly, generating political capital can considerably affect organizational sovereignty, because the enrolling of powerful political patrons can be accompanied by major changes to corporate personnel and the onset of significant bureaucratic control. Indeed, a conversation in early 2012 with Dragon senior executive Mr Z went a long way to explaining the dynamics of such situations. Responding to a direct question about why Dragon initially invited only a minority investment stake from CG, he commented rather sardonically: State ownership is helpful, but not more than 50%, otherwise the bureaucrats have too firm a grip . . . Remember [under state control] you don't need to think about innovation . . . because you won't be able to get anything done! At one point, therefore, Dragon's political strategy seemed to be working effectively, as organizational actors mobilized political capital ('whom you know') to facilitate bolstering enterprise legitimacy through voluntary co-optation. However, the exchange's culture and objectives became progressively ambiguous under the demands of increased state control. As a result, some key managers either left Dragon or were replaced, with this seemingly an unintended consequence of the voluntary co-optation strategy adopted in the organization's planned defence. When, during a follow-up conversation in late 2017, a regional government official was asked why, compared with other regional trading venues, Dragon was now underperforming, he replied wryly: 'The management teams of other [regional venues] have remained intact. But Dragon's has now been essentially replaced by DL's . . . So [despite surviving the crackdown] Dragon was "over" as a trading organization once DL took charge.'

What you know: The in-house cultivation of intellectual capital
As a sanctioned organization attempting to survive, the second key to Dragon maintaining legitimacy was building strong intellectual capital (or 'what you know'). During the period of direct observation, this was clearly the case in dealings between the organization and regional government, dealings that provided much of the political bedrock for establishing the exchange's validity in the eyes of SOEs such as CG and DL. As the three-pronged reflexive analysis below outlines, intellectual capital came to play a key role in realizing a corporate strategy of voluntary co-optation by the state. To improve the acceptability of Dragon's in-house lobbying, several ploys were developed in its cultivation. Notably, the exchange tried to recruit talented individuals who could not only contribute intellectually to the organization's strategic objectives, but also had experience in dealing with western corporations in the financial services sector. Moreover, developing in-house intellectual capacity was promoted not only as a functional end, but also as means to create a knowledge base capable of counteracting those of powerful state institutions. To facilitate organizational viability 'what you know' was thus deemed one of the most important considerations in respect of actors being enrolled into Dragon's 'whom you know' networks. In developing a strategic response to crackdown, three practices above all were seen to bolster the organization's intellectual capital and thus survival aspirations: talent recruiting, strategic researching and peer learning.
Talent recruiting: Building the ability pool. An example of talent recruiting emerged in the early phases of field research, during which Mr X, Dragon's COO, recruited the fieldworker to 'strengthen the team'. As noted, the fieldworker conducted research interviews with Mr X in January and July 2011, largely because of his extensive (20 years +) career experience in futures. In return for being interviewed, it was agreed the fieldworker would act as a translator for X during a forthcoming business trip to London. During this trip, and specifically following a meeting at a prominent London financial house (LC hereafter), X commented, 'It looks hopeful to establish a co-operative partnership with LC. We must follow this up . . . so we will need you from now on.' As noted, the fieldworker negotiated an agreement whereby she could conduct ethnographic research while working as Dragon's 'Strategy Manager'. At the time of these negotiations, X explained the political significance of the fieldworker occupying such a dual role: You can't represent the exchange properly unless you have some seniority . . . In the exchange, everybody will give you better access if you have a manager's title . . . The most important thing is that you will meet regional government officials . . . We can introduce you as a manager of the exchange and a researcher from a UK business school.
Through such discussions, X was endeavouring to cultivate intellectual capital: to enrol someone with a business research background and from a recognized overseas educational establishment. Indeed, from informal conversations with Dragon staff, this had apparently always been a significant factor influencing X's decision to be interviewed for the research. During the London visit, the fieldworker was able to justify her involvement by translating the nuances of X's strategic vision to UK executives, something apparently lost during previous visits to the UK and the USA. The implication was the fieldworker could be valuable in helping X secure relationships with FFOs, especially LC. However, this was not the only advantage accruing from the fieldworker playing this dual role: conversations within Dragon suggested she was politically expedient because regional officials would be impressed by the firm employing a UK researcher as its 'Strategy Manager', especially one from a long-standing business school. X's calculation of the fieldworker's intellectual value therefore appeared based on a calculation of three factors: 'whom she knew' (a UK university, its business school and faculty, etc.), 'whom she could know' (prominent FFOs, their professionals and systems, etc.) and 'what she knew' (translation skills, business theories and research methods, etc.).
When the 2011 crackdown was announced, the fieldworker's intellectual capital became directed at one crucial issue: developing a trading model theory for the exchange. Dragon's management team had been trying to build such a theory for years but lacked access to relevant academic and business sources in English. Thus, in hiring the fieldworker, Dragon had recruited a missing piece in its corporate jigsaw. In addition, a month before the fieldworker arrived at Dragon, a new Chief Engineer, Mr K, joined the organization. It soon became clear within Dragon that X had recruited K for the latter's experience as a financial infrastructure consultant to US exchanges. K's main responsibility became improving Dragon's trading technology, and hence he focused on developing transaction operations. As one of the fieldworker's primary responsibilities was responding strategically to external events, she began to work closely with K, and notably to prepare the presentations for, and subsequently responses to, scheduled visits to Dragon by the CSRC and the National Development Research Centre (NDRC). These visits would go a long way to determining Dragon's corporate future and specifically in establishing its legitimacy under voluntary co-optation.
Strategic researching: Building in-house knowledge capacity. We have noted that lobbying content developed in-house could potentially bolster Dragon's intellectual capital and subsequently its political capital. This was clear in the case of an ad hoc encounter with central government policy makers, one in which Dragon enrolled regional government as a political patron to justify its trading model. Specifically, Dragon needed credible expertise to back an argument that its model was based largely on 'spot' rather than 'futures' trading. The substantive difference reflects the delivery of assets being traded; for a futures contract is an agreement to buy or sell a commodity or security at a predetermined price and at a specified future time, while in spot trading the price is determined at the point of trade, and the exchange takes place at that moment or shortly afterwards.
For Dragon, the rationale for having its activities mainly classified as spot was political, that is, to gain approval from the regulator that the exchange should not face closure. At Dragon, senior management provided the fieldworker with appropriate resourcespersonnel, expertise and networks -to meet the classification task. The fieldworker then led the team charged with developing the rationale under a new trading model theory, with those inputting knowledge to the project being from various backgrounds. In addition to personnel at Dragon, researchers at the regional FDO and experts from FFOs contributed, albeit inadvertently in the case of the latter. Additionally, at this time the fieldworker's ethnographic research became reframed by Dragon's senior management as not so much a diversion from the work of Strategy Manager but as more a valid project reflecting professional skill and worth.
Although we have seen Dragon's links with think-tanks reflect the latter being information dissemination channels, when the exchange was developing the trading modelproviding financial infrastructure for the region and planning the regional trading group -Dragon itself was acting as a think-tank, for regional government; albeit one whose credibility was based more on 'what you know' than 'whom you know'. Such projects were initiated by regional government as part of its own response to the 2011 crackdown. When the clampdown hit, regional government was required by central government to 'rectify' its trading venues, the implication being it must also upgrade professional capability in this area. At that time, however, the regional FDO had only two researchers working in the area of financial infrastructure. Indeed, China's research capacity in this area generally was deficient, with the four national exchanges taking recourse to a single trading model, the 'vertical silo' (Norman, 2011). In addition, exchanges shared one infrastructure, the Futures Market Monitoring Centre (Hu and Sun, 2009), which limited the horizons for both domestic regulators and practitioners. As the largest trading venue in the region, Dragon was therefore an important partner of regional government in developing local financial infrastructure. Notably, the exchange was an organization that could potentially help regional government in its quest for greater financial expertise, research capacity and importantly links to western firms and markets. Such collaboration would facilitate not only the development of a trading model for regulating the local market, but also provide strategic vision for the region's economic development. Moreover, Dragon's research knowhow, including its trading model, could offer vital support for constructing a 'rectification' proposal on financial infrastructure (to be submitted to the CSRC-led IMJC) as well as for gaining regional access to a reputable FFO, for example, in the UK or the USA, a body that could act as a strategic partner once the proposal was approved.
In early 2012, the region hosted a visit by the senior official of the CSRC, which provided a vital opportunity for Dragon to lobby government policy makers directly. The plan was for Dragon to present its trading model theory and convince the regulator it was a legitimate exchange trading in innovative, primarily spot, contracts; rather than a rogue exchange trading in 'quasi-futures'. The CSRC senior official was an academic who had held a visiting position at a prominent UK university. Before the 2012 IO statements were published, he and his research team had investigated China's futures market and visited several regions active in trading. The senior official's meetings with trading venues and regional governments were organized as mini conferences, during which exchanges presented their business models followed by Q&A sessions. In such sessions, the senior official and his team exclusively asked the questions and representatives from the venues responded.
Originally, the CSRC visit was to be hosted by Dragon, but at short notice it was moved to regional government. However, the exchange was successful shortly afterwards in hosting a related visit by the NDRC, central government's leading research department. Politically this was an accolade for Dragon, in that organizations hosting senior governmental visits could be given positive coverage in the media (Schuler et al., 2017). In the event, Dragon's executives deemed both visits to be successful, in that most of the exchange's strategic objectives were met. Indeed, fieldnotes from the time suggested the political tide caused by the crackdown was now turning in Dragon's favour: Mr Z briefed me that the meetings with the CSRC should have been sufficient to convince the CSRC that we were not a 'futures' exchange and the trading model did not violate the Regulation. Mr Z was confident because he knew personally that the CSRC senior official and his team had 'responded differently' when other exchanges had tried and failed to argue their case. Mr Z described how after one exchange presented -claiming its model was an innovative model of spot trading -the senior official scoffed, 'No, this is futures, with a 20% margin!' After Dragon's presentation, however, the senior official reacted differently, informally advising another CSRC official -the overseer of futures regulation, seated beside him -that Dragon's model was probably not a variant of futures. This seemed to imply that even if it were subsequently deemed so, this classification could be rectified.
The positive views expressed by CSRC officials appeared to be mirrored by those of regional officials who attended the meeting. The impression was that the trading model had demonstrated sufficient legitimacy to convince the regulator that Dragon was not a 'rogue' exchange. In this case, therefore, strategies of 'whom you know' and 'what you know' had seemingly played well together, and notably in that intelligence developed in-house had enabled Mr Z to respond with confidence and eloquence to the CSRC's enquiries. As such, another building block of voluntary co-optation was now seemingly put in place.
Peer learning: Building knowledge exchange provision. As noted, the fieldworker's tasks of planning a regional trading group and helping to build local financial infrastructure involved supplying expertise on western business systems to regional government. In addition, FFOs were important sources of both knowledge and credibility to Dragon and the region. Ongoing relationships with FFOs provided Dragon with crucial intelligence about trading methods in the West, the history of financial markets and even information on Chinese financial regulators (Muthusamy and White, 2005). Subsequently, Dragon incorporated much of what it had learned from foreign institutions into the new trading model theory, the local financial infrastructure and the strategic economic vision for the region.
Because FFOs were considered such prestigious sources of knowledge for developing China's markets, any domestic organization gaining access to them was deemed to possess significant advantages politically. In turn, FFOs themselves increasingly wished to build good political and economic relationships in China, to access the country's expanding financial markets. Meanwhile, regional governments in China sought to develop their own intellectual capital by learning from FFOs. However, while foreign financial firms were generally held in high regard -not least by China's central governmentregional government officers had few opportunities to construct meaningful relations with them. Therefore, if an exchange were able to enrol a venerable western financial institution into a strategic partnership or network -as Dragon was attempting to do with LC -this could signal to regional government the organization's legitimate commercial competence and professional stature.
As Dragon's strategic talks with LC progressed, executives from the London-based organization agreed to visit the Chinese exchange. When the visit materialized, high on LC's agenda was meetings with regional officials. This was perceived of key importance to the region as its officers had the opportunity to ask detailed questions about financial market operations in the UK. In wake of the visit, Dragon executives persuaded their counterparts at LC to invite a delegation of Chinese regional officials to London. Although initially LC executives had difficulty grasping the significance and importance of the invitation, they nevertheless arranged a four-day programme of events in the UK, including workshops at LC headquarters, visits to other well-known financial institutions, presentations by the International Organization of Securities Commissions and the London Metal Exchange, and a small conference on trading international derivatives. In the event, an ancillary team from Dragon, including the fieldworker, accompanied the regional officials, with again the fieldworker acting as translator. During the visit, regional officials appeared to benefit greatly from exposure to the operations of a major western finance house, with a senior official suggesting the delegation was 'keen to learn from advanced professionals'. Throughout the talks and meetings, members of the Chinese delegation asked questions keenly and took notes avidly. The upshot of the visit was that ties between LC, Dragon and regional government became significantly strengthened. Above all, channels for knowledge exchange between the parties had been created. Once again, institutional relationships based on 'what you know' became central to Dragon securing legitimacy, credibility and ultimately voluntary co-optation by the state.

Discussion
This research has developed a new concept for CPA research -voluntary co-optation. This has been advanced to fill a gap in the CPA knowledge base; that is, the need for a notion to explain theoretically organizations seeking, freely, to have their equity and operations appropriated by the state. In making this contribution, we explain how our research adds to understanding the outcomes of CPA processes and in this case specifically to issues of organizational survival. The impetus for our investigation has thus been to build on existing CPA research by extending its scope in new empirical and theoretical domains, and notably by explaining processes of strategic acquiescence.
The key contribution of this primarily ethnographic analysis is that causal relationships so neatly hypothesized by researchers in the CPA and guanxi literature -regarding, for example, 'connection for protection', 'equity for stability' or 'gifting and banqueting for associations' -are not always manifested so in the field. Instead, we found voluntary co-optation to be the only consistent theme to explain adequately Dragon's corporate strategy at that time -one representing an iterative and tentative process under which political and intellectual work was undertaken for which the outcomes were potentially uncertain, difficult to measure or even subject to misinterpretation. The result was a situation in which considered corporate actions could be accompanied by unintended longerterm consequences for which strategic compromises had to be accepted reluctantly in resolution.
In developing this analysis, we have built conceptual explanations of the practices whereby the focal organization took various steps to effect a strategy of voluntary cooptation. Our view is that, historically, CPA research -based largely on researching western corporations -has been lacking in its failure to consider the kinds of complex political relationships and indeterminate strategic trajectories described and explained in this article. We feel further that research on CPA, rather than seeking to delimit or worse debar contributions based on voluntary co-optation, should instead benefit theoretically from its inclusion. It is therefore in this spirit that we argue that our work contributes to the broadening of CPA analysis.
One of the ways in which we have extended the scope of CPA analysis is to provide the 'connection for protection' hypothesis with deeper and richer forms of explanation than is typical in empirical accounts of organizational change in China. Focusing on the embroiling of state and market relations, and specifically probing the motives and actions of 'red capitalists', we have extended this area of CPA research to incorporate the activities of a new cadre: the senior management of SOEs, whose actions straddle state and market, political and economic, missions. In this context, the research has reflected an in-depth study of how, in an 'informal' financial sector, an organization responded strategically -for good or ill -to institutional sanctions threatening its existence.
In the process, we have addressed two questions: how is voluntary co-optation effected in relation to political capital (to facilitate organizational survival in a hostile environment) and, relatedly, how does the cultivation of intellectual capital aid corporate enrolment in key networks (to improve the legitimacy of lobbying content for achieving organizational viability)? In forming answers, we have explained how Dragon's senior executives functioned increasingly as 'red capitalists' seeking corporate legitimacy through voluntary co-optation -notably by trading equity to the state -and how the inhouse fostering of intellectual capital facilitated enrolment into strategic networks to improve legitimacy -through talent recruiting, strategic researching and peer learning. Through this analysis, we have extended CPA theory building to address the principal research issue: what can an organization do to survive when its existence is a challenge to dominant institutions?
In deliberating this issue, we note initially how the CPA literature has identified a range of theoretical concerns relevant to understanding the role of corporate politics in and among Chinese enterprises and institutions. Among this literature are contributions to analysing organizational relations in guanxi-building. Researchers have often explained, for example, the use of 'gifting' and 'banqueting' as methods of building guanxi -to optimize 'whom you know' relations (Gold et al., 2002;Guan and Frenkel, 2018;Xin and Pearce, 1996;Yang, 1994Yang, , 2002 -and indeed both were experienced regularly during fieldwork. Corporate commensality, for example, was considered beneficial not only in improving the exchange's prospects for achieving voluntary co-optation, but also in aiding the investigation generally, notably through allowing access to key actors when they were relaxed and the setting was informal.
Such guanxi practices, however, mainly represent an agreeable form of social connection-building. Without achieving cognizance of the broader and more substantial intellectual work that underpins co-optation -to prepare, for example, a well-developed and eloquently articulated corporate message -such connections alone cannot realize an organization's political strategy, no matter how costly built. In terms of theorizing 'what you know', we have shown that key stakeholders were attracted to Dragon because of its competence in practical market-related activities along with possessing intellectual capacity for handling non-market-related actions. One of Dragon's main strategic objectives was thus to cultivate intellectual capacity in-house in ways that could supply highquality knowledge and expertise to political stakeholders and patrons. For example, during meetings with regional officials to discuss building local financial infrastructure, a question repeatedly asked was whether in the current political climate the exchange's 'talent pool' was substantial enough for the task, and thus by implication whether Dragon had sufficient intellectual capital to undertake major financial projects.
To theorize the dynamics at the heart of these enterprise-state relations, Figure 5 builds on the analysis of research themes (in Figure 1) and institutional networks (in Figure 4) to explain how the development of intellectual and political capital formed steps to voluntary co-optation, and ultimately an organizational response to institutional sanctions in a hostile environment. Specifically, the figure theorizes the interplay of 'whom you know' and 'what you know' forces (represented by thin solid-line boxes) in relation to the advancement of a major project -the new trading model theory -in analysis that also defines the role of countervailing political forces (dashed-line boxes). Figure   Developing   5 illustrates how justification of the new trading theory was a central plank of Dragon's corporate political activities. When the original theory (largely the work of Mr Z and the exchange's CEO) was cited in the crackdown notice, and hence discredited, the exchange had to act quickly to enrol intellectual resources capable of developing a more credible alternative. Above all, Dragon needed to develop intellectual capacity to facilitate organizational viability through the only political strategy deemed feasible: voluntary co-optation. Figure 5 thus theorizes the mutual facilitation of political and intellectual capital in this regard, with double arrows denoting the impact of such mutuality. This illustrates how the new trading model was not merely a 'theory' in an academic sense, but also represented an actor within a network that reflected the 'enrolling' and 'translating' (Law, 1992) of inputs from, for example, talent recruiting, strategic researching and peer learning to produce solutions to the institutional problems the exchange faced (Greenwood et al., 2002;Joutsenvirta and Vaara, 2015). Figure 5 also mirrors how development of the new theory was at the centre of a broader legitimacy struggle, with the model being advanced, practised and disseminated by Dragon and its allies, while being simultaneously confronted, attacked and discredited by the exchange's political rivals, frequently advocates of the state's regulatory crackdown. The figure explains therefore how Dragon's attempt to achieve voluntary co-optation reveals a case of CPA within an essentially liminal strategic space.
Bringing the analysis to a close, we have explained above how during the crucial 2012 CSRC visit to the region, the new trading model theory had appeared well received. Indeed, after a concerted attempt from 2013 to disseminate the theory, it began to appear variously on the internet and in mainstream financial media. However, not long after (2017)(2018)(2019) in press conferences and published minutes, the CSRC and IMJC started listing the new theory as itself a 'rogue' model needing rectification, albeit more in conceptual than technical terms. 4 By this time Dragon had become state controlled, and in the process experienced significant changes to its corporate leadership and strategy-making activities. In terms of a main political patron, regional government had of course given way to the state-owned DL group, with the exchange now experiencing more direct forms of institutional control. Consequently, the intellectual and research capacity Dragon had established in the face of state sanctions had atrophied amid significant overhaul of its operations. Despite the exchange having technically 'survived' the 2011 state crackdown, by the end of the decade its trading volume had plummeted, as most brokerage companies comprising its membership had departed. Indeed, during discussions with former colleagues and past interviewees in 2019-2020, the suggestion was that far from being a 'rogue trader' Dragon Exchange -through voluntary co-optation and strategic acquiescence -had now morphed into a far more docile entity, one resembling more a 'zombie trader'.
Finally, it could be argued that in some respects the notion of 'state capture' (Lardy, 2019) might be deployed as an 'after the fact' interpretation of the information on which this research is based. However, in narrating the evolution of this case our position is that state capture implies too great a degree of agency on the state's part. Instead, drawing on the ethnographic and historical information gathered here, and emphasizing iterative processes of strategic acquiescence, we have described how measures initially developed as forms of political repositioning by Dragon Exchange had to be realigned on several occasions by the organization; albeit that the control relinquished ultimately reflected qualitative as much as quantitative change, as various restructurings saw key personnel leave the organization and in their place state actors begin to control operations from various key C-suite positions and the chairmanship of the Board. Therefore, in narrating this evidence, we emphasize, empirically and ontologically, how iterative processes of strategic acquiescence were at the heart of the case described. Whereas our research can possibly be made to fit, post hoc, with notions of the resurgence of state dominance, we feel this is not necessarily reflective of how matters for Dragon Exchange emerged and evolved 'on the ground'.

Conclusions
The study has broadened CPA theory by analysing systematically a range of power dynamics between Chinese financial organizations and the state. It has shown how a significant challenge to corporate leadership arises when key stakeholders recognize that for an organization to survive it must assemble a range of legitimate political and intellectual forces to serve in its defence. The article has thus described how forces of political capital ('whom you know') and intellectual capital ('what you know') can interact to sustain legitimacy in a hostile institutional environment. Empirically, the article has analysed ethnographic data from China's futures market to produce a nuanced study of strategic repositioning. Specifically, we have explained how a designated 'rogue' futures operation was targeted by a regulatory crackdown but ostensibly 'survived' by negotiating new forms of institutional control. Findings have illustrated the kinds of practices that influenced this organization's strategic moves during a critical period. In the process, we have developed a new concept for CPA research -voluntary co-optation -to describe, inter alia, how in times of political struggle taking on the role of red capitalists can help expedite the development of politically acceptable forms of organizational acquiescence; for example, through ceding key executive positions and equity being coopted by the state. This has seen CPA research expanded to encompass the activities of a new cadre of red capitalists -the senior management of SOEs -whose interests straddle state and market concerns. Our research has described, therefore, one organization's political endeavours to achieve corporate legitimacy in the face of hostile constraints. The research has challenged simplistic notions of Guanxi-building through constructing -in an empirically grounded, conceptually systematic and methodologically reflexive manner -a complex case of organizational change and development. The end result is research that presents the reader with an opportunity to get analytically closer to the setting and appreciate a range of strategic issues associated with achieving corporate credibility and viability in China.