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Towards a Political Theory of the Firm

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  • Luigi Zingales

Abstract

Neoclassical theory assumes that firms have no power of fiat any different from ordinary market contracting, thus a fortiori no power to influence the rules of the game. In the real world, firms have such power. I argue that the more firms have market power, the more they have both the ability and the need to gain political power. Thus, market concentration can easily lead to a “Medici vicious circle,” where money is used to get political power and political power is used to make money.

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  • Luigi Zingales, 2017. "Towards a Political Theory of the Firm," NBER Working Papers 23593, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23593
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    Cited by:

    1. Vallés, Javier & Salas Fumás, Vicente & San Juan, Lucio, 2022. "Corporate economic profits in the euro area: The relevance of cost competitive advantage," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 569-585.
    2. Giuliani, Elisa, 2018. "Regulating global capitalism amid rampant corporate wrongdoing—Reply to “Three frames for innovation policy”," Research Policy, Elsevier, vol. 47(9), pages 1577-1582.
    3. Boris Begović & Dušan Popović, 2019. "Merger Control and Economic Growth of LDCs: Some Observations and Recommendations," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(2), pages 381-408, March.
    4. Hao, Liang & Rong, Wang & Haikun, Zhu, 2020. "Growing up under Mao and Deng : On the ideological determinants of corporate policies," BOFIT Discussion Papers 20/2020, Bank of Finland, Institute for Economies in Transition.
    5. Marina M. Lebedeva & Maxim V. Kharkevich, 2018. "The Role of Business in Transforming the Political Organization of the World," Outlines of global transformations: politics, economics, law, Center for Crisis Society Studies, vol. 11(1).
    6. Cardillo, Giovanni & Cotugno, Matteo & Perdichizzi, Salvatore & Torluccio, Giuseppe, 2024. "Bank market power and supervisory enforcement actions," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Pitelis, Christos N & Tomlinson, Philip R, 2017. "Industrial organisation, the degree of monopoly and macroeconomic performance – A perspective on the contribution of Keith Cowling (1936–2016)," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 182-189.
    8. Chen, Deqiu & Ma, Yujing & Martin, Xiumin & Michaely, Roni, 2022. "On the fast track: Information acquisition costs and information production," Journal of Financial Economics, Elsevier, vol. 143(2), pages 794-823.
    9. Charis Vlados & Dimos Chatzinikolaou, 2019. "Towards a Restructuration of the Conventional SWOT Analysis," Business and Management Studies, Redfame publishing, vol. 5(2), pages 76-84, June.
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    11. Bae, Kee-Hong & Bailey, Warren & Kang, Jisok, 2021. "Why is stock market concentration bad for the economy?," Journal of Financial Economics, Elsevier, vol. 140(2), pages 436-459.
    12. Brown, Jeffrey R. & Huang, Jiekun, 2020. "All the president's friends: Political access and firm value," Journal of Financial Economics, Elsevier, vol. 138(2), pages 415-431.
    13. Child, Travers Barclay & Massoud, Nadia & Schabus, Mario & Zhou, Yifan, 2021. "Surprise election for Trump connections," Journal of Financial Economics, Elsevier, vol. 140(2), pages 676-697.
    14. Røpke, Inge, 2020. "Econ 101—In need of a sustainability transition," Ecological Economics, Elsevier, vol. 169(C).
    15. Liang, Hao & Wang, Rong & Zhu, Haikun, 2020. "Growing up under Mao and Deng: On the ideological determinants of corporate policies," BOFIT Discussion Papers 20/2020, Bank of Finland Institute for Emerging Economies (BOFIT).
    16. Leppälä, Samuli, 2021. "A partially exclusive rent-seeking contest," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 60-75.
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    18. Martin, Julien & Toubal, Farid, 2020. "Corporate tax avoidance and sales: micro evidence and aggregate implications," CEPR Discussion Papers 15060, C.E.P.R. Discussion Papers.

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    • G3 - Financial Economics - - Corporate Finance and Governance

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