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Strong State, Weak Managers: How Firms Cope with Autocracy in Hungary

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  • Dorottya Sallai
  • Gerhard Schnyder

Abstract

This paper investigates how companies manage risk associated with political ties in the context of the ‘return of state capitalism’. We show that findings from previous studies of firms’ copying strategies under autocratic regimes are of limited relevance in the context of Hungary, because they lack a sophisticated, theoretically underpinned conceptualisation of ‘the state’. We develop a more fine-grained analysis of the role of the state in emerging markets. We then show that the type of ‘state capitalism’ that is emerging in Hungary poses unique challenges to companies with implications for existing theories of companies’ political ‘buffering strategies’. Based on interviews with business leaders in Hungary, we identify two coping strategies: responsiveness –whereby firms accommodate state pressures by giving in to them – and a non-responsive strategy of ‘dormancy’, which consists in firms putting forward-looking activities on hold and focussing on survival. We discuss implications for theories of corporate political risk management.

Suggested Citation

  • Dorottya Sallai & Gerhard Schnyder, 2015. "Strong State, Weak Managers: How Firms Cope with Autocracy in Hungary," Working Papers wp474, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp474
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    Cited by:

    1. Schnyder, Gerhard & Sallai, Dorottya, 2020. "Between a rock and a hard place: Internal- and external institutional fit of MNE subsidiary political strategy in contexts of institutional upheaval," Journal of International Management, Elsevier, vol. 26(2).
    2. Miklós Szanyi, 2016. "From party state capture to party business capture - Model feature of Visegrád countries?," IWE Working Papers 226, Institute for World Economics - Centre for Economic and Regional Studies- Hungarian Academy of Sciences.

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    More about this item

    Keywords

    State capitalism; political ties; corporate strategies; clan state; post-socialism; autocracy;
    All these keywords.

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • H13 - Public Economics - - Structure and Scope of Government - - - Economics of Eminent Domain; Expropriation; Nationalization

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