Business Associations, Personal Connections and Other Ways of Lobbying by Russian Firms

Abstract: The most common ways of influencing new law and regulations throughout the world are business organizations and personal connections with bureaucrats and politicians. What are the relative benefits and disadvantages of these two lobbying strategies? How do firms choose between them? This empirical study aims to answer these questions using a comprehensive survey of a cross section of 1013 Russian firms. First, our data shows that lobbying is significantly correlated with risks of being captured by bureaucrats and politicians. Moreover, those firms who lobby using personal connections report relatively more often that they have high risks of being captured by the bureaucrats. The connections predictably are used more often when managers are familiar with governor or mayor or they have the experience in bodies of state administration. Older firms also use individual strategy more often. But these factors do not influence the decision to use business association as a way of lobbying. Finally, we compare the effectiveness of lobbying as viewed by the respondents and show that both methods give the similar average effectiveness and surpass all other methods of influencing (e.g. mass media, oligarchs etc.)