The political roots of intermediated lobbying: evidence from Russian enterprises and business associations

Abstract

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.

Businesspeople in Elected Office: Identifying Private Benefits from Firm-Level Returns

“…Gehlbach, Sonin, and Zhuravskaya (2010) argue that rent-seeking businesspeople should be less likely to seek elected office when institutions are more democratic, since they fear being voted out by the median voter. This article alternately uncovers that businesspeople value more politically competitive parliaments that are able to pass more encompassing legislation and allow more voices to be heard (Pyle 2009; Govorun, Marques, and Pyle 2016). When parliaments are weak, businesspeople prefer to lobby the executive branch.…”

Strategic Sensemaking and Political Connections in Unstable Institutional Contexts

“…Associations and lobby groups replaced the need for informal networking as the country moved toward more armslength relations (Govorun et al, 2016;Klarin & Ray, 2019 As of the early 2010s, the government has been committed to supporting several "priority" industries that include the military-industrial complex, shipbuilding, aircraft, machinery, metallurgy, engineering production, chemical production, pharmaceuticals, forestry, light manufacturing, information technology, and agriculture (Ministry of Industry and Trade of the Russian Federation, 2017). The government is adamant about creating an innovative culture through various programs, including stimulation of innovative activities of state-owned corporations, direct funding of innovative smalland medium-sized enterprises (SMEs), fiscal stimulation of innovative business activity, development of overall competition level, development of public-private partnership models and mechanisms, removal of state overregulation of high-tech business, creation of "competence centers" to generate and commercialize knowledge, pilot projects in Russian regions, and formation of industry clusters and technology platforms (Gokhberg & Kuznetsova, 2011).…”

“…Although political networking substitutes for formal regulatory structures and enhances competitive advantage, efficiency, and performance (Govorun, Marques, & Pyle, 2016; Peng & Luo, 2000), those firms that face the drawbacks of newness and unconnectedness, as well as outsiders, have significant difficulties competing with connected firms (Luo, 1997; Oezcan & Guenduez, 2015). The seemingly advantageous effects of political networking expand into gaining insider information, opening up resources that are otherwise unavailable, and increasing opportunity recognition (Gu, Hung, & Tse, 2008).…”

What do business associations do?

“…This is a question of political accountability, which is outside of the scope of this review. We have some evidence in the Russian case that political competition and political accountability incentivize policy-makers to pay more attention to more encompassing interests (Govorun et al, 2016).…”