This article investigates the role of boards in founder-managed firms with concentrated ownership in emerging markets. The literature frequently suggests that in this type of companies, boards have little influence on the corporate decision making. The article conducts a case study of AFK Sistema—a large Russian founder-managed firm with concentrated ownership. We observe that, contrary to the expectations, in this company, the founder provided real authority to the board, at the same time focusing on recruiting independent (mainly foreign) members. Based on this case, we argue that selectively empowering boards in this type of ownership setting could be beneficial for the firm: Selective empowerment is a source of intrinsic motivationfor the independent board members, making them proactively search for new projects and assist in their implementation on behalf of the firm. As a result, the company can overcome a number of important barriers in its development.
What characteristics of firms give them the confidence to invest in settings rife with expropriation by local officials? Empirically, firms in the developing world often face the threat of expropriation from local agents of the state rather than a centralized autocrat. Because policing local officials is costly, the state cannot easily credibly commit to doing so. This has negative consequences for investment. We argue that one solution is to allow firms to approach the state directly to ask for intervention. Not all firms are equally able to successfully get the attention of the state, however, so this mechanism only works for some. We develop an argument about the firm-level characteristics – large-scale employment, political connections, foreign ownership, and business association membership – that should make the central state more attentive to calls for help. Because firm with these characteristics are more likely to secure intervention against predatory bureaucrats, the latter are less likely to try to expropriate them. These firms’ investment decisions should be less sensitive to local expropriation than other firms. We test this argument using data on cases of decentralized expropriation across Russia’s regions and firm-level data from a cross-regional, large scale survey of Russian firms.
Accountability—constraints on a government’s use of political power—is one of the cornerstones of good governance. However, conceptual stretching and a lack of reliable measures have limited cross-national research on this concept. To address this research gap, we use V-Dem data and innovative Bayesian methods to develop new indices of accountability and its subtypes: the extent to which governments are accountable to citizens (vertical accountability), other state institutions (horizontal accountability), and the media and civil society (diagonal accountability). In this article, we describe the conceptual and empirical framework underlying these indices and demonstrate their content, convergent, and construct validity. The resulting indices have unprecedented coverage (1900–present) and offer researchers and policymakers new opportunities to investigate the causes and consequences of accountability and its disaggregated subtypes. Furthermore, the methodology provides a framework for theoretically driven index construction to scholars working with cross-national panel data.
How and when are governments able to encourage firms and schools to work together to develop workers' skills? Upgrading the quality of human capital in the workforce is widely seen as a key challenge faced by countries looking to escape the “middle income trap.” Growing attention has been paid to public-private partnerships (PPP) between individual firms and schools as a powerful tool for meeting this challenge, but key facilitators of PPP thought crucial in existing studies – strong, independent employers' associations and labor unions – are often missing in such settings. To explore the emergence of PPP in skill development in the developing world, we draw on recent reform experiences in Russia's regions that have led to a surge in complex, costly forms of PPP despite weakly developed business associations and unions. We argue that variation in the administrative capacity of regional governments and their political accountability explains this surge. Strong administrative capacity reassures all parties that regional authorities can monitor their counterparties' compliance with agreements, while political accountability creates incentives for authorities to do so. We test our argument using original data on the existence and content of firm-school partnerships across all Russia's regions for 2013.
How and when are governments able to encourage firms and schools to work together to develop workers’ skills? Upgrading the quality of human capital in the workforce is widely seen as a key challenge faced by countries looking to escape the “middle income trap.” Growing attention has been paid to public-private partnerships (PPP) between individual firms and schools as a powerful tool for meeting this challenge, but key facilitators of PPP thought crucial in existing studies – strong, independent employers’ associations and labor unions – are often missing in such settings. To explore the emergence of PPP in skill development in the developing world, we draw on recent reform experiences in Russia’s regions that have led to a surge in complex, costly forms of PPP despite weakly developed business associations and unions. We argue that variation in the administrative capacity of regional governments and their political accountability explains this surge. Strong administrative capacity reassures all parties that regional authorities can monitor their counterparties’ compliance with agreements, while political accountability creates incentives for authorities to do so. We test our argument using original data on the existence and content of firm-school partnerships across all Russia’s regions for 2013.
This paper investigates the links between investment activity and personal contacts for small and medium-sized firms with public officials at the sub-national level in Russia. A list-experiment design, using a survey of 21,000 Russian firms in 2017, was used to evaluate the importance of personal connections with officials for conducting business. A total of 27% of firms without investment and 37% with investment considered personal connections with officials an important factor for doing business. The importance of such contacts was lower in regions with a better investment climate. However, a higher proportion of firms were likely to invest in the regions where higher importance was placed on political connections. Therefore, in Russia in the mid-2010s, investment from politically connected firms did not crowd out investment from other firms. Although the available data did not allow causality to be defined, the research shows that political connections are important for investors in emerging markets and that the importance of political connections diminishes with improvement in the business climate. This paper provides a quantitative estimate of the relationship between political connections and firm investment in Russia, an example of large emerging economy. This relationship is moderated by institutional quality at the subnational level. The results provide empirical support for the theory of limited access orders elaborated by North, Wallis, and Weingast (2009), and stress the importance of rents and their productive utilization for the development of emerging economies.
During the past few decades, many developing countries have initiated public procurement reforms. One of their prime objectives was to limit corruption, enhance competition, and reduce the scope of procurer opportunism. However, radical changes in regulations have resulted in the emergence of new opportunities for opportunism this time on the supplier side.
What conditions enable governments, educational institutions, and enterprises to organise joint, comprehensive technical and vocational education systems (TVET) in developing and transitional countries? This paper explores this question on the basis of an original survey of enterprises in 12 Russian regions designed to determine the factors affecting local adoption of German-style ‘dual education’ in TVET. We distinguish between firm-level and regional-level factors influencing firms to form institutionally costly partnerships with vocational schools and government entities for the sake of upgrading skill formation. Our findings point to the importance of state intervention in fostering and enforcing firm-school partnerships in settings lacking the dense network of labor and business organizations characteristic of coordinated market economies in Western Europe.
Since about 2009, increasing budgetary constraints forced the Russian state to become notably less tolerant of lower-level corruption and predatory behavior by state agencies. In this paper, we argue that after a first stage of decentralized corruption and state capture during the 1990s, and a second period of decentralized corruption and business capture during the 2000s, Russia has entered a third stage of more centralized corruption since 2009. We build our argument on a detailed discussion of property rights relations in Russia, and support it with indicative quantitative data, suggesting that raiding attacks on businesses and corrupt behavior by state agencies have become less frequent and more centralized between 2009 and 2016. The sustainability of this move towards a more centralized mode of corruption remains questionable, however, mainly due to the lack of a long-term vision for the development of the country.
This paper analyzes the process of renegotiation of the informal contract between the regional and federal elites of Russia after the economic crisis. We use the database of Center of Public Procedures’ “Business against Corruption” to show that, after 2011, regional elites in Russia lost the preexisting opportunity to extract rents from businesses in return for favorable election results for Vladimir Putin and United Russia. We also analyze the connection between the level of corporate raiding in various Russian regions and the political competition, tenure, and ties of their governors. We show that there are two distinct models for fighting raiding in a region: an authoritarian model for suppressing negative signals and a competitive model with the creation of a new consensus among the elites. Although both models are similar in terms of the absence of negative signals, they have very different consequences in the business context of an area.
Effective systems of vocational education are crucial to economic and social development. However, coordination of labor market demand and supply of skill requires either well-functioning labor market institutions or institutionally-embedded strategic partnerships among government, labor, and employers. In particular, the transplantation of German-style dual education methods to a different environment poses significant institutional dilemmas. Russia presents a useful case for examining the conditions under which such arrangements can be established. Based on a series of interviews in six Russian regions and a set of case histories, we seek to draw testable hypotheses that can be applied to other settings.
Modern clientelist exchange is typically carried out by intermediaries—party activists, employers, local strongmen, traditional leaders, and the like. Politicians use such brokers to mobilize voters, yet we know little about their relative effectiveness. We argue that broker effectiveness depends on their (1) leverage over clients and (2) ability to monitor voters. We apply our theoretical framework to compare two of the most common brokers worldwide, party activists and employers, arguing the latter enjoy numerous advantages along both dimensions. Using survey-based framing experiments in Venezuela and Russia, we find voters respond more strongly to turnout appeals from employers than from party activists. To demonstrate mechanisms, we show that vulnerability to job loss and embeddedness in workplace social networks make voters more responsive to clientelist mobilization by their bosses. Our results shed light on the conditions most conducive to effective clientelism and highlight broker type as important for understanding why clientelism is prevalent in some countries, but not others.
This paper presents a survey-based methodological approach to detect potential opportunism by counterparts who are linked with agents through contractual relations. The methodology proposes asking counterparts about attitudes toward some behaviors of agents, which are undesirable from the principal and benevolent counterpart perspective. The approach identifies the potential opportunism of counterparts based on the intensity with which they justify such behavior and provide unrealistic assessments of commonly known problems. The approach is especially important in a situation where the rules are inconsistent with reality and the principal can no longer disentangle the benevolent and opportunistic behavior of the agent. The authors test this approach by conducting a survey of procurers and suppliers of public procurement contracts in Russia.
A survey of the top management of 1716 industrial companies in Russia in 2018 shows differences in the likelihood of losing property as a result of raider attacks. In this article, we analyze the factors that affect the subjective attitudes about the level of security from violent pressure on business. We show that large companies with political connections can effectively use the judicial mechanism to protect their interests. Small companies without political connections also feel quite protected avoiding participation in the courts and staying imperceptible. Companies that have unsuccessful experience in litigation see the greatest risks for themselves. To receive additional protection such companies participate in business associations.
Хотя влиянию интернет-технологий и социальных медиа на протестную активность уже посвящено немало работ, их воздействие на интенсивность террористических атак изучено пока недостаточно. Стремясь заполнить существующий пробел, Н.Хохлов и А.Коротаев проанализировали связь между показателями распространения интернета и количеством терактов. Согласно их гипотезе, поскольку в ситуации подконтрольности СМИ режиму именно Интернет открывает возможности для быстрого и широкого распространения информации о терактах, увеличение числа интернет-пользователей в автократиях должно быть положительно связано с интенсивностью террористических атак. В странах с демократическими или гибридными режимами, где хотя бы часть СМИ функционирует относительно свободно, такого рода связь должна отсутствовать. Тестирование гипотезы осуществлялось на материалах Global Terrorism Database и базы данных Всемирного банка с использованием отрицательных биномиальных регрессионных моделей.
Проведенное авторами исследование отчасти подтвердило выдвинутую гипотезу. Анализ эмпирических данных показал, что в автократиях распространение интернета действительно является фактором роста интенсивности террористических атак, тогда как в странах с демократическими и гибридными политическими режимами подобной зависимости не просматривается. Вместе с тем полученные результаты не позволяют утверждать, что выявленные различия проистекают из особенностей медиа-среды при режимах раз- ного типа. Проверка этого предположения требует дальнейших изысканий и уточнения исследовательской методики, в том числе за счет смещения фокуса внимания на уровень отдельных регионов, а также изучения каузальных механизмов с помощью смешанных методов и байесовской статистики.
The paper analyzes the shifts in government priorities in terms of support of big and medium manufacturing enterprises amid 2008—2009 and 2014—2015 crises. Based on the data of 2009, 2014 and 2018 surveys of Russian manufacturing firms, using logit regressions we identify factors that affect the receipt of financial and organizational support at different levels of government. The analysis shows that in 2012—2013 the share of manufacturing firms that received state support shrank significantly as compared to 2007—2008; moreover, the support concentrated on enterprises that had access to lobbying resource (such as state participation in the ownership or business associations membership). In 2016—2017 the scale of state support coverage recovered. However, the support at all levels of government was provided to firms that carried out investment and provided assistance to regional or local authorities in social development of the region, while the factor of state participation in the ownership became insignificant. The paper provides possible explanation for these shifts in the criteria of state support provision in Russia.
This article analyzes the influence of economic and political institutions on the attention of the leading print media of the G20 countries to political leaders. Based on the Factiva database which indexes publications from 35 000 mass media of 159 countries of the world, we collected the database on the number of mentions of country leaders in the five leading publications of all the countries of the G20 for 2018. In addition, we use the Institutional Quality Index data to assess the quality of institutions in the countries we study. In this study we use the theory of global news flow and the concept of political personalization. We show that attention to the leaders of countries with good economic institutions is higher than to the leaders of countries with poor economic institutions. However, the relationship with political institutions is the opposite: more attention is given to the leaders of countries with law-quality political institutions. In addition, the results show that the media of countries with more developed economic institutions are less likely to mention leaders of countries with less developed economic institutions. But for the differences in political institutions the situation is the opposite: the media of countries with more developed political institutions more often mention leaders of countries with poor political institutions. We can conclude that the leaders of authoritarian countries seek to participate in the formation of the agenda and achieve a higher level of self-attention despite economic factors. This study complements the theory of global news flow by indicating that political factors are no less important in shaping the international media agenda than the economical factors.
Until 2010, the Russian federal elite could turn a blind eye to violent pressure on business in regions in exchange for high results for the ruling party at the federal elections. Based on the analysis of public information on violent pressure on business from 2011 to 2016 collected by Center of Public Procedures “Business against corruption” we show that the economic crisis could force the authorities to reconsider this informal agreement. Since attempts to centralize raiding were ineffective, the government started to use an additional tool to manage violence associated with the appointments of the governors. We believe that the control of violent pressure on business has become part of the responsibilities of the new governors, and the ability to fulfill these responsibilities is related to the level of political competition in the region. In regions with relatively high political competition, control over violence is achieved through the creation for consensus between the elite groups, in regions where there is practically no competition on regional elections, the model of authoritarian control over violent pressure on business is possible