Political Holes in the Economy

1. A p1 P Political Holes in the Economy David Stark & Balazs Vedres B

2. Business-to-business partnershipsare a resource for economic action.

3. Business-to-business partnershipsare a resource for economic action. Firms can also make allianceswith political parties.

4. But by making alliances with politicalparties, firms are engaging a different type of ally, operating according to a different logic of action.

5. But by making alliances with politicalparties, firms are engaging a different type of ally, operating according to a different logic of action. Appointing politicians to corporate boards brings the logic of partisanshipinto the boardroom.

6. As firms reach into the field of politics, does the logic of political partisanship reach into the field of business?

7. As firms reach into the field of politics, does the logic of political partisanship reach into the field of business?Does partisanship shape partnership?

8. Basic statement of the research problem

9. We are studying a simultaneous transformation of the economic field and of the political field.

10. We are studying a simultaneous transformation of the economic field and of the political field. At the outset, the political and the economic are so tightly entangled that it is scarcely possible to separate the two.

11. The goal: a market economy of competing firms and a liberal democracy of competing political parties. The means: separate state from market, sever political ties from the field of economic action.

12. But to compete, governing parties need to manage the economy, and all political parties need access to resources.

13. But to compete, governing parties need to manage the economy, and all political parties need access to resources. Meanwhile, to compete, firms need access to government contracts and to timely information about government policies.

14. In political competition, parties compete for firms. In economic competition, firms ally with parties.

15. Our question: What is the relationship between political affiliations and business networks? In particular, does political partisanship shape business partnerships?

16. Data & operationalization

17. Data: Economic Officeholders Directly from the Courts of Registry, we collected the names of all • senior managers, • members of Boards of Directors, and • members of Supervisory Boardsfor the largest 1,696 companies in Hungaryfrom 1987-2001. Time in office recorded on monthly time frame. The resulting dataset contains about 120,000names.

18. Data: Political Officeholders We also collect the names of every political officeholder in Hungary including • members of Politburo and Central Committee • members of Parliament • senior government ministers and their political deputies • mayors of municipalities and localities. For every political officeholder, we recorded • party affiliation • and time in office (month/year).

19. By merging the two datasets, we can precisely identify whether a given company had an economic officeholder who was also a political officeholder.

20. We count a directorship tie between two companies when• a senior manager of one company sits on a board of another company or • when an individual sits on a board of each of the two companies.

21. Company A and Company B have an economic partnership A B

22. Company A and Company B have an economic partnership when Individual I sits on boards of each company. A B I

23. We count a company as having a political affiliation when one of its economic officeholders is a current or former political officeholder.

24. A B

25. A P B

26. A Company A has a political affiliation P B

27. A p Company A has a political affiliation when one of its economic officeholders P B

28. A p1 Company A has a political affiliation when one of its economic officeholders is also a political officeholder P B

29. A p1 Company A and Company B share political affiliation P B

30. A p1 Company A and Company B share political affiliationwhen each has ties to the same political party. P p2 B

32. P P

33. P P

34. P P

35. P P

36. P P

38. A company is politically balanced if it has at least one politician from each of the political camps.

39. “We want to have balanced political relations. We attempt to have a balanced and stable board. I think it’s common knowledge what the political preferences of our board members are. So and so are with the Free Democrats. Mr. __ is a former member of Parliament with the MDF. Mr. __ represents the MSzP from the APV Rt. We can prove that this concept is workable over time to defend us when governments change.” (Executive of a large chemical company)

40. Our question: What is the relationship between political ties and business networks? Specifically, are business ties more likely within political affiliations and less likely across them?

41. business tie

43. The political cast of characters

44. SzDSz The liberals “With a clean past for a clear future.”

45. MDF The conservatives “Our home is Hungary, our house is Europe!”

46. MSzP The Socialists “For the future” “Development and security”

47. Fidesz The Young Democrats “Please choose”

48. Fidesz The New Right “System closing bash”

49. KDNP Christian Democrats “A clean past, a promising future”

50. The Smallholders “From whom I get the land is to whom I give my vote!”