Chapter | Global Corporate Evolution: Looking Inward or Looking Outward | 2004

Measuring the Value of Political Connections After Liberalization: Some Thoughts on Theoretical Constructs and Improved Research Design

by Jordan I. Siegel

Abstract

Scholars have recently begun to focus heightened attention on how firms in emerging economies react and even thrive during deep liberalization. Yet one fundamental question remains less than satisfactorily answered. How much in terms of scarce resources should firms in emerging economies allocate to acquire political connections relative to other purely market-based activities as R&D and marketing once liberalization deepens? In other words, given a constraint on available finance, technology and managerial time, how much should managers allocate to increasing "who they know" as opposed to "what they know" (Tung and Worm 2001)? Should firms react to liberalization more by managing their guanxi network or by investing all their resources in market-based technological and marketing capabilities? Some authors have suggested that deep liberalization requires that firms in emerging economies invest less and less on politics and more and more on R&D and marketing (Chang 2003; Guthrie 1999). Other authors suggest that it is precisely during liberalization that the returns to political connections increase relative to many other market-focused activities (e.g., Róna-Tas 1994).

Keywords: liberalization; emerging economies; political connections; Business and Government Relations; Emerging Markets; Strategy;

Citation:

Siegel, Jordan I. "Measuring the Value of Political Connections After Liberalization: Some Thoughts on Theoretical Constructs and Improved Research Design." In Global Corporate Evolution: Looking Inward or Looking Outward, edited by Michael A. Trick. Carnegie-Mellon International Management Series. Pittsburgh: Carnegie Mellon University Press, 2004.