Why Russian Firms Need Business Lobbies

Professor William Pyle from Middlebury Collage gave a seminar about research into Russia's business lobby. In 2014, together with Finnish economist Laura Solanko, he received the National Award for Applied Economics, which was established by organizations including the HSE.

Pyle and Solanko received their awards for their research published in 2013 on 'Lobbying in Russian economy: Verifying Olson's thesis on comprehensive organizations'. It was founded in results from research carried out in the mid 00s.

The research carried out by William Pyle and his colleagues in Russia involved checking the hypothesis proposed by Mancur Olson from Maryland University, that business associations delay technological development – and the development of the economy as a whole. Companies that are members of business unions typically display defensive behavior, aimed at suppressing their competition, distributing rents, and maintaining the status-quo, rather than behavior aimed at development.

However, the data from their research (which involved carrying out surveys of hundreds of companies and business associations) tells another story. Membership of business associations chiefly involves a restructuring of this behavior, companies are highly likely to invest resources in retooling, new technology and employee training, and also expand exports or imports.

Information and consulting support is the main reason for joining a business union, followed by the opportunity to lobby, and in third place — protecting themselves from the unlawful interference of the state in the company's day-to-day business. There is a correlation between the importance placed on this factor and the level of political competition in any particular region: the lower the level of competition, the more importance is placed on being able to defend oneself against external interference. The response of companies to this kind of interference is also interesting. Two thirds have experience of 'spot checks' which William Pyle says has become a euphemism for the extortion of bribes. And just 41% of those who have experienced this opted to complain or turned to a third party (arbitration court or government agency). The rest decided that any kind of appeal will only prove more costly.

In most cases companies choose to join regional business associations, rather than national ones (239 out of 280 companies surveyed). The researchers carried out a separate survey of the managers of 145 regional associations. The main services they offered their members was lobbying and participating in forming laws an economic policy in the region.

Of the companies surveyed (which included an equal number of those which are members of associations and those which are not), 64% of companies said that they do not try to influence economic policy or law-making. And among the members of regional associations, the proportion of ‘inert’ companies is just 47%. Businesses turn to the associations for help more readily than to the media or trades unions. The most widespread form of influence on regional policy involves the direct interaction with representatives of the executive and legislative branches of power.

Photos: Alexandra Utkina