The Power of Connections: Colonialism, Nationalism, and Corporate Performance in Egypt, 1890 - 1950

Cihan Artunç and Mohamed Saleh

No 17424, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the impact of political connections on firm performance in colonial and postcolonial settings. Under colonialism, establishing connections with domestic politicians -- who share power with the colonizer -- may or may not benefit corporations, depending on the congruence of these politicians with the colonizer. After independence, investment in politics likely becomes more profitable, as postcolonial states often impose barriers to the corporate form, as part of an industrial policy. Using novel data covering the universe of corporations, founders, and members of parliament and cabinet in colonial (1890--1923) and post-independence Egypt (1924--1950), we demonstrate that political connections lowered firm profitability before independence, but increased it afterwards. Connections were harmful under colonialism, as business-politicians were members of the nationalist movement, but became lucrative after independence as being connected deterred entry, expedited incorporation, and reduced exit risk.

Keywords: Political connections; Colonialism; Firm dynamics; Nationalism (search for similar items in EconPapers)
JEL-codes: F54 G38 N45 (search for similar items in EconPapers)
Date: 2022-07
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