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Other Unpublished Work
| 2011
Military Ties, New Ventures, and Political Risk Management in Emerging Economies
by
Shon R. Hiatt and Wesley Sine
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Abstract
New ventures in emerging economies face a number of challenges such as political instability, corruption, and uncertain property rights that can severely hinder their ability to grow and survive, yet little is known about how startups can mitigate such risk. Using data on firms in Latin America over a 65-year time period, we explore how new ventures can gain advantages by establishing ties to what is typically the most powerful, coercive institution in a nation state—the military. We find that an affiliation with elite military actors (i.e. generals on boards of directors) increases a new venture's survival and lowers the probability new ventures will face adverse government actions such as expropriation. This research also demonstrates that the positive effects of military ties on new-venture performance increase in contexts characterized by greater political instability, market competition, and foreign ownership.
Citation:
Hiatt, Shon R., and Wesley Sine. "Military Ties, New Ventures, and Political Risk Management in Emerging Economies." 2011.