A key component in the exchange relationship between government and business in modern liberal democracies is the level of public trust that each institution enjoys. However, trust does not affect both equally. A fall in trust for government is likely to diminish a government's policy discretion much more than an equivalent fall in trust for business will diminish a business actor's capacity to make profit or shape public policy. In addition, there are good reasons to believe that government will tend to find it more difficult than business to maintain trust from its stakeholders, or to recover it when lost. In this paper, I insert a role for public trust dynamics into Lindblom's theory of the structural power of business. I then return to the debate in this journal on business power and the 2010 Australian mining tax I show that the existing accounts omit the role of trust in the conflict and as a result “discover” much more incompetence from the Australian government than really existed.

The form of state bailouts of banks can vary widely. Some are highly interventionist, expanding state control and pushing losses onto private actors, while others insulate private actors from losses. This paper demonstrates that the nature of national financial systems is a key determinant of the form of state intervention, through a statistical analysis of state responses to financial crises in the upper middle-income and upper-income states from 1974 to 2009. States that rely on private banks for most capital needs generally adopt more generous terms than states where capital markets play a significant role. These effects are both statistically significant and large. States with capital market-based financial systems are one and a half times more likely to nationalize banks and over twice as likely to recover state bailout funds. Moreover, other seemingly important variables, such as party ideology, do not produce significant effects.

The literature on corporate political influence has primarily focused on expenditures made by corporations and their PACs but has largely ignored the political activities of the individuals who lead these firms. To better understand the role of corporate elites in political advocacy, I introduce a new database of campaign contributions made by corporate directors and executives of Fortune 500 firms. Donating to political campaigns is nearly universal among corporate elites. When compared to corporate PACs, corporate elites are more ideological, more willing to support non-incumbents, and less likely to target powerful legislators. The results also reveal substantial heterogeneity in the political preferences of directors both across and within firms. In addition to challenging widely held beliefs about the political leanings of corporate elites, the prevalence of bipartisan boardrooms has important implications for how the preferences of key decision-makers within a firm shape its political activities.

The Global Financial Crisis (GFC) is seen as arising from a new social structure of accumulation that institutionalised a neoliberal form of capitalism post the 1980s. This gave rise to “financialization,” which has increased both the power of financial markets over other economic sectors, and of financial market actors over national governments. However, while the neoliberal ideology underpinning financialization had a global impact, it sprang from the leading free market economies of the US and UK and was most readily embraced by states sharing their institutional support for it, such as Australia and Canada. But to what extent has it been questioned in these states since the crisis? In this article we examine perceptions of the legitimacy of finance via a 6 year comparative study of editorials in the mainstream press over 2007–2012. We do so because shifts in perceptions of the legitimacy suggest the extent to which the GFC produced the potential for more fundamental institutional change. We find that rather than this legitimacy having been undermined, or transformed, existing viewpoints instead hardened over the period considered. This indicates that, despite regulatory reform, the power of finance remains relatively unchanged.

This paper explores the contribution of national institutions to the competitive transformation of big commercial banks in late industrializing countries through the analysis of the Spanish case. The paper uses a comparative historical analysis to establish that strategic coordination between the state and large banks is a structural feature of the banking sector but may be articulated differently depending on the balance of power between states, banks and industry, the preferences of these actors, and their resources. Using evidence from Spain since the late 1970s, the paper argues that in this country, state-bank coordination was articulated as a non-hierarchical system of negotiated interactions and mutual exchanges of benefits between small groups of decision-makers at the government, the central bank, and big banks. Under the Spanish model, large banks contributed to the fulfillment of public policy objectives to develop the central bank's capacity to conduct monetary policy, strengthen supervision of the banking system, and modernize the financial sector. In exchange, big banks benefited from a favorable regulation that enabled them to restructure, consolidate the leadership of a new generation of bankers, and reach the efficiency frontier of their industry. The paper contributes to the literature of institutionalism by questioning the traditional dichotomy between market and strategic coordination. It also contributes to the literature of competitiveness by stimulating debate about the role of the state in supporting the transformation of big business.

This study researches how the arbitrariness and pervasiveness of corruption affect the decision-making process and subsequent operations of firms investing in highly corrupt host locations. The results of the analysis demonstrate that firms headquartered in countries where corruption is high have an advantage when operating in a foreign country with a similar institutional environment. The reason for this advantage is that these firms possess knowledge of how to cope with the arbitrary and pervasive dimensions of corruption. Firms from countries with lower corruption levels than the host country, however, are more affected by corruption in a highly corrupt host country. Finally, though this study finds evidence that all firms operating in a highly corrupt country might participate in corrupt deals, those headquartered in highly corrupt countries are more likely to be willing to do so. This claim is based on 12 in-depth interviews with managers with FDI allocation responsibilities of firms operating in a highly corrupt host country. The results show that firms from less corrupt countries face stronger pressures from their headquarters to not engage in corrupt deals, whereas firms from more corrupt countries do not encounter such pressures.

A business enterprise interested in influencing the design, adoption or enforcement of a particular law, rule or regulation often confronts a choice. Does it lobby officials directly? Or does it do so indirectly, using a collective action group as an intermediary? We draw on data from a large, 2010 survey of enterprises across the Russian Federation to demonstrate that the propensity to engage in intermediated lobbying increases with region-level political competition. Our explanation builds on recent evidence confirming Mancur Olson's claim (1982) that less encompassing actors tend to lobby for more distortionary policies. We hypothesize that with greater political competition government officials become more responsive to encompassing voices (i.e. associations of businesses as opposed to single firms), since the electoral costs of being captured by narrower interests becomes greater. Evidence from a complementary survey of regional business association managers points in the same direction; the relative attention paid by officials to lobbying efforts by encompassing associations increases with political competition.

Decisions over state assistance to firms can hinge on whether politicians choose a strategy that favors particular interest groups, targets aggregate economic performance, or both. Which types of firms are more likely to receive financial help from the government? While standard interest group based explanations tend to see special interests dominating the political process, extraordinary economic challenges, such as financial crises, may make general economic concerns a greater priority for politicians. We argue that during financial crisis, politicians – who are always concerned with the economy – are even more likely to prioritize broad economic growth over helping particular groups. Politicians should favor general economic strategies over helping specific groups of firms because they have limited resources and wish to avoid sending a bad signal to other firms about helping those that fail. Using 2010 World Bank firm-level surveys done in Bulgaria, Hungary, Latvia, Lithuania, Romania, and Turkey, we find that politicians favored small dynamic firms with a proven ability to use resources well rather than the largest employers, those firms with the greatest lobbying capacity, or firms in particular sectors. We optimistically conclude that interest groups with disproportionate resources will not always get special treatment at the expense of others.

Why do some countries indulge in urban bias, potentially harming economic development in the process, while others promote a vibrant agricultural sector? Two main explanations have been put forth. On the one hand, market failures, due to information asymmetries, mean that farmers who dearly require credit to succeed are shut out of lending markets, even if lenders could potentially benefit from making loans more readily available. On the other hand, political failures, due to state capture, mean that farmers will be subject to implicit taxes as a way of generating rents for politically powerful, industrial interests in the city. This paper builds on the latter view and corroborates [Bates, Robert. 1981. Markets and States in Tropical Africa. Berkeley, CA: University of California Press.] insight that the state might have its own fiscal reasons for indulging in urban bias since both infant industries in the manufacturing sector and monopsony endowing marketing boards in the agricultural sector potentially provide easy-to-collect revenues. I adduce cross-national empirical support for the fiscal roots view that is robust across measures of state capacity and instrumental variables. A case study of Mexico also provides supporting evidence.

This paper contributes to both corporate political activity (CPA) research and capabilities theory research by offering models that better describe the process that managers undertake to nurture a political capability. This is done through the interplay of four factors inherent in political actions, namely (i) corporate structure, (ii) firm-government linkages, (iii) political access and (iv) public policy pressure. Additionally, recognizing that political capability attainment is not a binary endeavor, I offer a political capability continuum to better categorize the magnitude by which differing firms allocate resources toward molding public policy. This paper adds to the scant literature on management-focused CPA research that integrates the resource-based view (RBV) of the firm and political action research.

This article examines the “technology, information, and news corporations” (TINCs), a group of under-studied non-state actors to enhance understanding of the interplay between forms of private authority in times of crisis. Three interrelated arguments regarding the shifting private authority of leading UK- and US-based TINCs are presented. First, contributions to the period of economic instability that began in 2007 have destabilized the long-standing authority of Anglo-American firms including Bloomberg, Dow Jones, and Thomson Reuters. Second, through their involvement in two overtly normative niches of global finance, environmental and Islamic finance, these private actors have responded to contestations of their authority with an enhanced stress on moral authority since 2007. Third, a mere tinkering around with pre-crisis technical knowledge and a persistent reliance on liberal market values is likely to perpetuate rather than resolve the unstable authority of the leading TINCs. Based on an original analysis of primary documents and interviews undertaken with industry participants, this article contributes to existing literature analyzing the changing nature of private authority by revealing limits to shifts and combinations between its moral and technical forms.

This article explores market reactions to regulations that addressed the link between armed conflict and the diamond industry. The results show that several regulatory actions taken by the United Nations and the United States in the early 2000s corresponded with lower stock returns for diamond mining companies. Such effects are inconsistent with predictions made by some critics of the Kimberley Process Certification Scheme. On the other hand, stock returns for jewelry companies were abnormally negative for events that hurt the reputation of conflict-free production and trade regimes. The expansion of legal diamond markets also coincided with abnormally positive returns for jewelry companies, while new restrictions on market access coincided with abnormally negative returns. The results suggest that i) diamond trade regulations affected businesses in important and measurable ways, and ii) that similar regulations may have broader applicability in related industries.

Since the enactment of economic liberalization in India in the early 1990s, variation in investment climate and labor market reforms across sub-national states has been linked to the increasing relevance of business in policy making. This article argues that the influence of business on policy is conditioned by wider political dynamics. We argue that the reform orientation of states correspond to the position of business classes and caste-based groups within the support base of political parties. We show that caste identification plays an important role on the position of political parties towards business liberalization policies. Thus, we conclude that the relative power of business across the states appears to vary due to the relation between business and government, which in turn is structured by the salience of business castes as an electorally relevant group.

We study how rich shareholders use their political influence to deregulate firms that they own, thus skewing the income distribution towards themselves. Individuals differ in productivity and choose how much labor to supply. High productivity individuals also own shares in the productive sector and thus earn capital income. All individuals vote over a linear tax rate on (labor and capital) income whose proceeds are redistributed lump sum. Shareholders also lobby in order to ease the price cap imposed on the private firm. We first solve analytically for the Kantian equilibrium of this lobbying game together with the majority voting equilibrium over the tax rate. We then proceed to a comparative statics analysis of the model with the help of numerical simulations. We obtain that, as the capital income distribution becomes more concentrated among the top productivity individuals, increased lobbying effort generates efficiency as well as equity costs, with lower labor supply and lower average utility levels in society.

Why do autocratic regimes contain bureaucratic corruption in some economic sectors but allow it in other areas? This paper examines variations in governance outcomes and perceptions across firms in Morocco based on a survey of 659 businesses. Three factors explain better public services and control of corruption: the magnitude of potential rents that firms can exchange with the administration, the collective action capacity of the sector vis-à-vis the executive, and the taxability of the industry. Firms in sectors with low rent potential are more likely to coordinate, claim, and obtain better governance in exchange for taxes, whereas high-rent companies find it difficult to sustain effective pro-governance collective action. The findings shed light on business–state relations in autocratic political regimes that have to balance revenue raising goals, policy commitments to selected sectors, and incentives for grand corruption.

The complicated and multi-layered policymaking process in the European Union presents private interests, such as business firms, with an interesting strategic choice of whom and how to lobby. As the costs of lobbying at the domestic level increase, firms are expected to, instead, devote their resources to lobbying at the European level. Specifically, this article examines how domestic access points and domestic partisanship affect the costs and benefits of lobbying at the domestic versus European level. Using data on firm-level decisions to lobby the EU, this research finds that in countries where is it more costly (or less beneficial) to lobby domestically, firms are more likely to lobby at the EU level.

Wind energy presents significant opportunity to provide a series of public goods. Drawing on the ideas of J.Q. Wilson and E. Ostrom, we compare options to overcome the obstacles that stand in the way of deploying wind energy in two US states, Texas and Minnesota. Texas outperformed Minnesota in deploying wind energy technology despite Minnesota's ample wind and other natural advantages. To explain this gap in performance, we argue that Texas outperformed Minnesota because of a more fitting governance system and rules for determining (i) boundaries, (ii) cost and benefit allocation, (iii) conflict resolution, and (iv) rule revision. Our approach sheds an alternative yet overlooked lens upon the topic of wind energy development by focusing on how the concentration of power and authority in the hands of a few dominant public and private elites can lead to the successful deployment of a complex renewable technology under some circumstances.