Please use this identifier to cite or link to this item: http://scholarbank.nus.edu.sg/handle/10635/34647
Title: COSTS AND BENEFITS OF BUSINESS-GOVERNMENT RELATIONS: AN EXPLORATIVE STUDY ON A FIRM’S PERCEIVED INFLUENCE ON LAW AND REGULATION IN TRANSITION ECONOMIES
Authors: SZETO KIT YING
Keywords: Business-Government Relations, Influence, Transition Economies, Bribery
Issue Date: 10-May-2012
Source: SZETO KIT YING (2012-05-10). COSTS AND BENEFITS OF BUSINESS-GOVERNMENT RELATIONS: AN EXPLORATIVE STUDY ON A FIRM’S PERCEIVED INFLUENCE ON LAW AND REGULATION IN TRANSITION ECONOMIES. ScholarBank@NUS Repository.
Abstract: This paper combines perspectives of business strategy and political science scholars to study the costs, benefits and potential long-term effects of building business government relation. Drawing on resource dependence theory and power dependence theory, I develop hypotheses on how firms build business-government relation through providing a stable economy, for example hiring more employees than needed and keeping tax revenues high, and how business government relation helps firms to deal with government officials easier and can, in turn, pay less bribes and enjoy lower operating costs. This paper also looks at the impact of business government relation on firm¿s subsequent investment and divestment behaviors. The hypotheses are tested by firm-level data in 25 transition economies. Empirical results show that firms reporting more tax and hire more unnecessary employees have stronger relation with government, i.e. are more capable in influencing policies and regulations related to their businesses. Firms with strong relation with government pay less bribery to government officials to get things done and to secure government contracts. Moreover, firms with strong relation with government are less likely to alter their production mix, which implies they are less likely to involve in innovations and new investment. Therefore, when building and maintaining business-government relation, firms should ensure that they can balance the costs and benefits in order to maintain reasonable future development.
URI: http://scholarbank.nus.edu.sg/handle/10635/34647
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