MENA Enterprise Survey Report Working Papers: Volume 5 - Beyond political connections

Description

All over the world, companies exert political influence. While this influence varies in its intensity, form and effectiveness, it is widely understood to be in competition with the interests of other firms, groups and the public at large. Political influence is greater in economies with poorer governance but more disperse in those with better governance. Within economies, higher influence is associated with a higher likelihood of reporting a small number of competitors, higher sales and lower labour inputs relative to sales.

Most analyses show large gains to firms with strong political connections. But while these connections may result in influence, that influence may be dampened or enhanced by particular combinations of other political interactions, including through legal channels, such as business associations, or through generally illegal ones, like bribery.

Political influence is a social construct that cannot be directly observed. Using an original, firm-level dataset from 41 diverse economies (mainly in Europe, Central Asia, the Middle East and North Africa) we try to understand how firms engage in interactions with public officials to gain influence. The analysis relies on the Enterprise Surveys, conducted by the EIB, EBRD and the World Bank. This is the fifth of nine working papers supporting the full report: Unlocking sustainable growth in the Middle East and North Africa private sector.