Political embeddedness of firms in Imperial and contemporary Russia

Daria Popova

doi:10.17918/00010857

In emerging markets, the state and its actors play a central role in shaping business outcomes. Given the pivotal role of the state in either facilitating or obstructing business operations, establishing sustainable and effective relationships with state and state actors becomes crucial for long-term business viability. The political embeddedness perspective, as a multidisciplinary research framework, is particularly valuable for understanding the intricacies of business-state interactions. This approach offers deep insights into how firms can strategically navigate and manage these relationships, enhancing their ability to align with shifting political and institutional dynamics common in emerging markets. This dissertation explores the dynamic nature of political embeddedness in the emerging market of Russia, where institutional volatility can transform political connections from strategic assets into significant liabilities. As political regimes shift and market conditions fluctuate, the once advantageous relationships firms establish with political actors may become sources of vulnerability, subjecting them to heightened instability and uncertainty. This dissertation advances the current understanding of political embeddedness by examining cases where firms are adversely affected by their associations with politically controversial or socially stigmatized figures. Through this lens, I underscore the risks inherent in maintaining political connections in politically volatile environments, offering new insights into the complex trade-offs faced by firms operating in such contexts. I study the political embeddedness of firms in two contrasting contexts: my first study focuses on a period of profound societal and political transformation, Late Imperial Russia (1870-1914), while my second study examines a period characterized by relative political stability, Contemporary Russia (2012-2018). In the first study of this dissertation, I demonstrate how political embeddedness can arise from a founder's political status within a historically entrenched status hierarchy. A firm's founder can serve as a critical liaison between the firm and the state, particularly when they are a member of the political elite. Through theorizing the phenomenon of "progressive delegitimization", I demonstrated how this form of political embeddedness can render a firm particularly vulnerable during periods of societal turbulence, thereby diminishing its viability. My findings reveal that firms founded by members of achieved versus ascriptive political elite groups display distinct survival patterns, as these groups experience varying rates of legitimation decay during episodes of social disruption. In the second study, I show how political embeddedness can stem from corporate political contributions. I propose that while corporate political donations provide firms with notable advantages, such as improved access to donor business networks, favorable regulatory environments, and perceptions of financial stability, these benefits also entail substantial costs. I compare donor and non-donor firms while holding all other observable factors equal and find that firms donating to non-ruling parties experience performance decline, whereas firms donating to the ruling party do not experience significant performance changes. The findings reveal the risks associated with aligning with non-dominant political forces. The findings of these studies have significant implications for business practitioners making decisions about cultivating ties with the state, as well as for scholars in the fields of management and political sciences, entrepreneurship, and sociology. This dissertation highlights the need for firms operating in volatile political environments to continually reassess their political connections in order to mitigate the potential liabilities arising from shifting political dynamics and the consolidation of power by a dominant political group.

Political embeddedness of firms in Imperial and contemporary Russia

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Political embeddedness of firms in Imperial and contemporary Russia

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