Political Factors of Firms' Success: Analysis by Bayesian Methods

This study investigates the relationship between political factors and firm performance using advanced Bayesian statistical techniques and detailed data. I try to understand casual links between different levels of interactions: macro- and micro-political and macro- and micro-economic. My research is an extension of previous set of studies concentrated around the question of relationship between the characteristics of political regimes and economic growth. The novelty of my work is that I incorporate micro-level into the study and use Bayesian statistical inference providing new insights different from frequentist statistics. Firm performance is modeled as the outcome of the economic-political bargaining between firms’ representatives and politicians. Political instability generates uncertainty that leads to ineffectiveness of enterprises and mistakes by employing market strategies. Political corruption could compensate the transaction costs for actors in short run, but preserves the development of institutions needed for sustainable development in long run period. The results of Bayesian multilevel modelling suggest the presence of negative relationship between political instability perceived by the firms’ representatives on the individual level and firm performance. The effect of political corruption on firm performance is different for sales growth and employment growth.