• Media type: E-Book
  • Title: Connecting to Power : Political Connections, Innovation, and Firm Dynamics
  • Contributor: Akcigit, Ufuk [Author]; Baslandze, Salomé [Other]; Lotti, Francesca [Other]
  • Corporation: National Bureau of Economic Research
  • Published: Cambridge, Mass: National Bureau of Economic Research, 2018
  • Published in: NBER working paper series ; no. w25136
  • Extent: 1 Online-Ressource; illustrations (black and white)
  • Language: English
  • DOI: 10.3386/w25136
  • Identifier:
  • Reproduction note: Hardcopy version available to institutional subscribers
  • Origination:
  • Footnote: System requirements: Adobe [Acrobat] Reader required for PDF files
    Mode of access: World Wide Web
  • Description: Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity - a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity
  • Access State: Open Access