Organized Business, Political Competition, and Property Rights: Evidence from the Russian Federation

Abstract

Political competition and ‘‘merchant group’’ pressures have been pointed to as forces that limit state threats to the property rights of firms. This article presents evidence confirming their importance and highlighting an interesting feature of their interaction. Drawing on separate surveys of managers at industrial enterprises and directors of business associations in the Russian Federation, we demonstrate that a firm’s willingness to contest government predation, its ability to influence reforms to its institutional environment, and its propensity to invest in physical capital are positively related both to the membership in a business association and to the level of political competition in its region. Of particular note, the relationship between association membership and property rights strengthens in less politically competitive regions. Business community collective action, that is, appears to serve as a substitute for political competition in securing firms’ property rights. (JEL D23, D71, P26)