Political Holes in the Economy: Business Camps and Partisanship

When firms reach out to allies in the political field, partisanship can constrain the choice of business partners in the economy. To study the evolution of politicized business camps, we conduct an historical network analysis of the relationship between firm-to-party ties and firm-to-firm ties in the Hungarian economy. We construct a dataset of all senior managers and boards of directors of the largest 1,696 corporations and the complete set of all political officeholders from 1987 to 2001. The findings of our field interviews and dyadic logistic regression models demonstrate that in Hungary director interlocks depend, to a significant extent, on political affiliations. Although the economic and political fields have been institutionally separated, firms and parties have become organizationally entangled. Firms of either left or right political affiliation exhibit a preference for partnerships with firms in the same political camp while avoiding ties with firms in the opposite camp. Subsequently, firms with politically balanced boards seize a brokerage opportunity to occupy the political holes in the economy opened up by the growing division between left and right. Our historical analysis demonstrates that political camps in the Hungarian economy occur not as a direct legacy of state socialism but as the product of electoral party competition.