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

Dorottya Sallai and Gerhard Schnyder

Working Papers from Centre for Business Research, University of Cambridge

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.

Keywords: State capitalism; political ties; corporate strategies; clan state; post-socialism; autocracy (search for similar items in EconPapers)
JEL-codes: P16 P26 H13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2015-12
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