Examination of Antecedents and Consequences of Business-Government Relationships

University Of Southern California, Los Angeles CA

Investigators

Abstract

Examination of Antecedents and Consequences of Business-Government Relationships This project will study the source and effects of the connections between businesses and governments. Business elites have played an active role in building various types of connections with political elites for decades in many countries. The primary goal of this project is to (1) demonstrate general patterns of how publicly listed firms, across a large number of countries in the world for over 30 years, hired politically connected individuals as their leaders, including top management team and board of directors; (2) examine how a key antecedent created by the external environment -- financial crises -- critically shape the formation and dissolution of firms' political connections, and (3) in each country, study the consequences of changing political connections of large publicly listed firms on the economic outcomes of small and medium-sized firms in the same country; including the emergence of young and new firms or local entrepreneurship. Antecedents and consequences of business-government relationships will be studied in the following ways. Recently developed information technologies in text analysis will be utilized to analyze and synthesize the information obtained from existing data and media coverage to build a large database of politically connected boards of directors and top managers of the largest publicly listed firms in multiple countries over time. One study will provide extensive and in-depth documentation of both the dynamic patterns of changes to political connections over time and the geographic distribution across different countries. The second set of analyses will investigate the effect of financial crises on the hiring of politically connected leaders by top listed firms. Various econometric analyses will be conducted in order to identify the causal effect of financial crises on corporate political connections. The third set of analyses will focus on how the distribution of firm size in each country change in association with changes to top listed firms' political connections. The project will advance scholarship in business organizations and political economy, particularly regarding the process through which businesses build political connections. It will also advance the research insights on how multi-country institutional contexts exert different influence on the formation and dissolution of political connections. Lastly, the study will draw attention to how financial crises and how different public policies employed in response to financial crises affect the evolution of corporate political connections, a common way in which economic and political power become connected. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.