Beyond political connections: a measurement model approach to estimating firm-level political influence in 41 countries

This paper puts forward a theoretically derived measure of firm-level political influence defined over a sample of firms from a diverse set of countries, permitting new inferences into state-business relations. We derive this measure from original surveys of 27,613 firms in 41 countries, which include information on several interactions with political actors. Using a Bayesian item response theory measurement model that incorporates non-ignorable missing data, we estimate influence scores that incorporate survey data on diverse mechanisms by which firms attempt to obtain influence. From the measurement model, we learn that membership in a business association contains the most positive information about a firm’s influence, while bribes, state ownership, firm size, and a reliance on collective lobbying tend to be substitutes for influence in equilibrium. Empirically, we are able to show for the first time how such influence is distributed across different types of political regimes using a measurement model, leading to intriguing hypotheses about how the costs and benefits of political activity structure corporate influence-seeking.