The second political service provided by firms is to supplement the state’s societal control efforts. When public grievances arise over a project, infrastructure, or plant, the state may politicize the associated firms by demanding their assistance in managing social unrest. Firms play two distinct roles in societal control: serving as allies when the state employs suppression strategies against protesters or acting as scapegoats when the state opts for appeasement strategies.

Private firms are more suited to serve as scapegoats, while SOEs, particularly large and powerful ones, are stronger allies. This distinction arises from differences based on ownership and extent of political capital available to firms. Private firms typically have narrower and more limited sources of political capital than SOEs. In sectors where protests become increasingly frequent and intense, suppression strategies often replace appeasement, leading to a decline in the standing of private firms as large SOEs gain dominance.

Using comparative case studies, process tracing, and in-depth interviews, this chapter builds on Chapter 6 to examine the mechanisms connecting protests, societal control strategies, and outcomes for firms in the solid waste treatment sector. Process tracing is first applied to Wuxi, a city with multiple incineration plants, to illustrate how escalating protests gradually shifted the city government’s strategy from appeasement to suppression. This shift in strategy made private firms less effective in providing societal control services, leading to the transfer of the city’s incineration plants into the hands of SOEs.

Next, a most-similar case study compares an incineration plant in Wuxi with another in Qinhuangdao, highlighting how differences in political capital, linked to firm ownership, influence the outcomes of societal control efforts. The weaker political capital of private firms means they are less equipped to assist local governments during protests, making them less favorable. This comparison sheds light on how Chinese local governments perceive protests and firms, explaining why SOEs increasingly dominate a sector as protests within it become more frequent and intense.