Business & Politics
Jurian Traas
B3EL112
2021 – 2022
,Contents
Week II: The Business-Government Interface.......................................................................3
Political environment.........................................................................................................................3
Political systems & spectrums...........................................................................................................3
Supranational entities........................................................................................................................3
Takeaways.........................................................................................................................................4
Lecture III – Corporate Political Strategies...........................................................................5
Corporate political activities (CPA)..................................................................................................6
Corporate political strategies (CPS)..................................................................................................7
Takeaways.........................................................................................................................................7
Lecture IV – Managing Political Risk in Business.................................................................7
Political risk and firm legitimacy.......................................................................................................7
Political risk as a strategic priority...................................................................................................9
Takeaways.......................................................................................................................................10
Lecture V: Highly Politicized Business.................................................................................10
Highly politicized business...............................................................................................................10
Corporate governance introduction.................................................................................................10
Takeaways.......................................................................................................................................12
Summaries of primary literature...........................................................................................13
Week 1.............................................................................................................................................13
Week 2.............................................................................................................................................13
Week 3.............................................................................................................................................14
Week 4.............................................................................................................................................14
Week 5.............................................................................................................................................15
2
, Week II: The Business-Government Interface
Political environment
Among the least predictable elements in the business environment is politics. Reasons for this
can be democratic parties of governments that pursue being re-elected every few years, which
means that pressure groups that interact with governments tend to change, and therefore there
will also be changes in the policies that are imposed by new governments.
This political impact differs depending on the system:
- Democratic vs. other forms (totalitarian or oligarchy)
- Corruption as a barrier to doing business and development
Because of this corruption, business success is not driven by offered value, but
rather due to bribing government officials.
Four main effects of a political environment
- It impacts the economy
- Is leads to changes in regulations
- Is affects political stability
- It impacts mitigation of risk
Resource dependence theory
Firms are highly dependent on external organizations for their resources, which implies
considerable risk. To manage this risk, organizations will try to reduce their dependence, or
aim for co-optation (aligning interests with the resource provider).
Governments as owners
State ownership has a small negative effect on firm financial performance, and political
connections have no direct consequences on performance. However, both state ownership and
political connections have a profound effect on the strategies firms pursue, such as financial
leverage, R&D intensity and internationalization, and these strategies play a mediating role in
the state ownership – firm performance relationship.
Political systems & spectrums
The major types of political systems are democracies, monarchies, oligarchies, and
authoritarian and totalitarian regimes. The political spectrum classifies the different positions
in relation to one another:
- From left to right: the extremes of communism and fascism
o Left strives for an equal society and believe that the government should play a
large role in people’s lives to achieve this. This is referred to a big government.
o Right believe that a certain level of social inequality is unavoidable, and that
the government should play a limited role in people’s lives: conservative.
Supranational entities
Multinational unions or associations in which the member countries give authority and
sovereignty of at least some internal matters to the group, and decisions are binding on its
members. Member states share in decision making on matters that will affect each countries
citizens and businesses. They exist to prevent conflict or gain greater collective influence over
global affairs.
3
Jurian Traas
B3EL112
2021 – 2022
,Contents
Week II: The Business-Government Interface.......................................................................3
Political environment.........................................................................................................................3
Political systems & spectrums...........................................................................................................3
Supranational entities........................................................................................................................3
Takeaways.........................................................................................................................................4
Lecture III – Corporate Political Strategies...........................................................................5
Corporate political activities (CPA)..................................................................................................6
Corporate political strategies (CPS)..................................................................................................7
Takeaways.........................................................................................................................................7
Lecture IV – Managing Political Risk in Business.................................................................7
Political risk and firm legitimacy.......................................................................................................7
Political risk as a strategic priority...................................................................................................9
Takeaways.......................................................................................................................................10
Lecture V: Highly Politicized Business.................................................................................10
Highly politicized business...............................................................................................................10
Corporate governance introduction.................................................................................................10
Takeaways.......................................................................................................................................12
Summaries of primary literature...........................................................................................13
Week 1.............................................................................................................................................13
Week 2.............................................................................................................................................13
Week 3.............................................................................................................................................14
Week 4.............................................................................................................................................14
Week 5.............................................................................................................................................15
2
, Week II: The Business-Government Interface
Political environment
Among the least predictable elements in the business environment is politics. Reasons for this
can be democratic parties of governments that pursue being re-elected every few years, which
means that pressure groups that interact with governments tend to change, and therefore there
will also be changes in the policies that are imposed by new governments.
This political impact differs depending on the system:
- Democratic vs. other forms (totalitarian or oligarchy)
- Corruption as a barrier to doing business and development
Because of this corruption, business success is not driven by offered value, but
rather due to bribing government officials.
Four main effects of a political environment
- It impacts the economy
- Is leads to changes in regulations
- Is affects political stability
- It impacts mitigation of risk
Resource dependence theory
Firms are highly dependent on external organizations for their resources, which implies
considerable risk. To manage this risk, organizations will try to reduce their dependence, or
aim for co-optation (aligning interests with the resource provider).
Governments as owners
State ownership has a small negative effect on firm financial performance, and political
connections have no direct consequences on performance. However, both state ownership and
political connections have a profound effect on the strategies firms pursue, such as financial
leverage, R&D intensity and internationalization, and these strategies play a mediating role in
the state ownership – firm performance relationship.
Political systems & spectrums
The major types of political systems are democracies, monarchies, oligarchies, and
authoritarian and totalitarian regimes. The political spectrum classifies the different positions
in relation to one another:
- From left to right: the extremes of communism and fascism
o Left strives for an equal society and believe that the government should play a
large role in people’s lives to achieve this. This is referred to a big government.
o Right believe that a certain level of social inequality is unavoidable, and that
the government should play a limited role in people’s lives: conservative.
Supranational entities
Multinational unions or associations in which the member countries give authority and
sovereignty of at least some internal matters to the group, and decisions are binding on its
members. Member states share in decision making on matters that will affect each countries
citizens and businesses. They exist to prevent conflict or gain greater collective influence over
global affairs.
3
