Antecedents of Business-Government Relationship: Evidence from 13 African Countries

Abstract

A strong Business-government relationship is one method of rent-seeking activity of firms. Using novel proxies of political connectivity from the World Bank Enterprise Survey (WBES), we study the relationship behavior of 7733 firms from 13 African countries with their government. According to the results of the baseline estimation and subgroup analysis using robust Tobit and Probit models, we find business regulations and policies trigger the relationship introspects of a firm’s strategic choices. The result further indicates that the strength and magnitude of the business-government relationship are subjected to specific country-level characteristics including, corruption level, regulatory quality, economic development, duration of government tenure, and the level of the bureaucracy of countries. Moreover, firm-specific characteristics including firm size, age, government dependency, extensive exporters, and the existence of informal market competition are among the firm-level antecedents of the Business-government relationship. Our separate analysis further provides that old, big, and manufacturing firms have more likely to form a strong relationship than others.

Keywords: Business-Government Relationship; Corporate Political Connectivity; Institutional Qualities; Small and medium firms, censored data.

DOI: 10.7176/EJBM/14-20-02

Publication date:October 31^st 2022