Historical Approaches to Network Dynamics; April 26, 2007, National Center for Supercomputing Applicaitons, The Age of Netowrks speaker series [requires Real Player]:
A general introduction to networks [in Hungarian]:
Research showcase: political connections
disintegrate business ties
Hungary
as a strategic research site
Hungary
between 1987 and 2001 is a case of concurrent marketization
and democratization in which market-oriented enterprises and
competing political parties emerged in tandem. At the beginning
of the period, Hungary was a planned economy in which almost
all productive assets were owned by the state, and the polity
was ruled by a monopolistic Communist Party. By the end of the
period, more than half of the capital in the large-firm sector
was controlled by foreign investors, and both the economy and
the polity were being integrated into the European Union (EU).
In the intervening decade, enterprises were privatized, the
economy was marketized, and political competition among parties
had resulted in the defeat of the incumbent party in each of
the parliamentary elections in 1990, 1994, and 1998.
The
Hungarian economy has, thus, completed the transformation to
a market economy. But despite the institutionalization of electoral
democracy and an unprecedented influx of foreign capital, many
of the senior executives with whom we speak complain of the
political polarization of the economy. Although the phenomenon
of a polarized political field is well-known, the notion that
the economy might be politically polarized is likely to be unfamiliar
to many. By political polarization, these senior managers refer
to the problem that the economy is divided into political camps.
A repeated theme of those conversations was that many large
firms are expected to show a distinctive affiliation either
to the left or to the right of the political divide.
Trends
in the political affilitions of firms
Figure
1. Proportion of firms and capital politicized.
The
figure above shows that the proportion of firms affiliated with
political parties is small at the outset, grows quickly until
about 1994, and continues to increase through 2001. Although
the proportion of politicized firms never exceeds 17%, the importance
of these firms in the Hungarian economy is better-captured by
weighting firms according to their capitalization. When taking
levels of capitalization into account, as the figure also shows,
the politicized segment of the Hungarian economy grows to almost
50 percent by 1994 and hovers with some variation around 40
percent throughout the remaining period.
Figure
2. Number of firms by political affiliation.
Changing
political fortunes had consequences for the relationships between
parties and firms, as seen in the figure above, in which dashed
vertical lines delineate the dates of the national elections.
After each election, political victors increase the number of
their affiliated firms. That increase is most dramatic for the
center-right coalition that won the 1990 election and presided
over the first freely-elected government from 1990-94. As Figure
CCC indicates, the number of firms with such a right political
orientation grew from effectively zero to over 90 during these
four years in power. The socialists, too, capitalized on political
success by increasing the size of their business base. In the
last year in which they were out of office, 1993, they had left-oriented
politicians on the boards of 50 firms. After coming to power,
this number doubled to 100 firms by 1996. A new right coalition
then wins the 1998 election, with the effect of increasing its
business base from about 50 to almost 80 firms.
In
addition to indicating that winning parties succeed at winning
firms, the figure also shows an important trend. Across the
three periods of alternating rule, we see that governing parties
face increasing difficulty in expanding their firm base while
in office: 88 in the first period (1989-93), 50 in the second
(1993-97), 30 in the third (1997-2001). Those numbers suggest
an increasing political competition over what becomes a more
or less stabilized level of politicized firms.
At
the outset, the center-right parties led by the Hungarian Democratic
Forum (MDF) had considerable ground to make up. The socialists
already had a business base in the old state-owned enterprises.
Some of these began converting to the newly recognized corporate
form (among other legal requirements, establishing boards of
directors) even before the system change. By 1989, left politicians
were sitting on the boards of 20 such companies. Once in power,
the right moved quickly and decisively. At the helm of the various
state property and/or privatization agencies, MDF officials
made sure that their politicians were appointed to the boards
of newly privatized companies as well as to those newly corporatized
firms that remained in state ownership. By 1992, after just
two years in office, the right could already claim more firms
than the left; and they pulled ahead still further in 1993.
This they achieved, on one hand, by temporarily slowing the
growth in the number of socialist firms and, more significantly
on the other hand, by aggressively increasing the number of
firms in which they placed their own politicians. To many observers
it seemed that the new governing party had gained a hold on
the economy and was consolidating these ties for the long run.
Politicized
business networks
Is
the Hungary political economy a politicized economy? If the
economy is politicized, we expect that the political affiliations
of firms will shape business ties even when controlling for
a broad range of economic factors that shape business group
formation. If the logic of business group formation is strictly
an economic logic, firms should be indifferent to the political
affiliations of their strategic partners.
To
test the expectation that political affiliations shape ties
in the business nework, we use a dyadic approach, where pairs
of firms are units of analysis, and the binary dependent variable
indicates the presence or absence of a tie between two firms.
One block of independent variables represent a business logic
of network connectedness (based on size, industry, ownership),
while another block represents a political logic (combinations
of political affiliations)..
Figure
3. Business logic in political and non-political dyads.
s.
The
figure above shows the fit of logistic regression models only
employing independent variables of the business logic. The two
lines represent two subsamples: dyads where none of the firms
are politicized, and dyads with at least one of them being politicized.
The salienceof the business logic in explaining buisiness network
ties decreases in politicized dyads after 1994.
Figure
4. Odds ratios for left-right political dyads.
s.
The
figure above shows the odds that two firms from opposing political
camps will establish a bisess tie to one another, keeping variables
of the business logic constant. The findings of our logistic
regression model indicate that political affiliations significantly
explain business ties in the Hungarian setting. In general terms,
the politicization of business ties increases throughout the
period such that, in the final two years, all of the political
variables are significant. Pairs of firms with opposite political
coloring exhibit a growing antipathy. That this trend starts
in the mid nineties and becomes more pronounced over the last
three years in our study. That is, it becomes less and less
likely that a firm with a left orientation will establish a
business network tie to a firm with a right political orientation.
Such antipathy does not spring full blown in the immediate aftermath
of the political transition but instead develops and intensifies
across the period of left-right party competition.
* * *
My
current research projects
Pathways
of property transformation - organziational network careers
David Stark
Balazs Vedres
Project
description:
This
research project is about mapping the network dynamics of
the largest 2000 firms in Hungary from 1987 to 2006. The sequences
of network positions and the local dynamics of networks will
be analyzed. We chart the interactions between political network
ties and business networks.
Research
grants:
Three grants won between 2001 and 2007, at the US. National
Science Foundation.
2007
David Stark, and Balazs Vedres. “Social Sequence
Analysis: Ownership Networks, Political Ties, and Foreign
Investment in Hungary” in: John Padgett, and Walter
W. Powell (editors): Economic Transformations and Trajectories:
A Dynamic Multiple-Network Approach. Santa Fe Institute
(forthcoming).
2006
Balazs Vedres. “Politikusok a magyar nagyvállalatok
hálózatában 1987-2001 között.”
Magyar Tudomány, 2006/11:1339-1344.
2005
David Stark, and Balazs Vedres. “Sequenze di rete e
investimento estero in Ungheria” Stato E Mercato
75(3):391-422.
East-European
civil society and information technology
David Stark
Laszlo Bruszt
Balazs Vedres
Project
description:
This
project looks at East European civil society as a strategic
research site of organizational innovation. We charted the
use of websites by representative samples of NGO sites in
fifteen countries worldwide, with an in-depth study with case
studies in four East European countries. We also surveyed
the largest 1000 civil society organizations in Hungary to
understand the role of technology in project organization
and the development of worth.
Research
grants:
Two grants won between 2002 and 2005, at the US. National
Science Foundation.
2005
Laszlo Bruszt, Balázs Vedres, and David Stark.
“Shaping the Web of Civic Participation: Civil Society
Websites in Eastern Europe.” Journal of Public Policy,
25(1):149-163.
2005
Laszlo Bruszt, Balázs Vedres, and David Stark.
“A technológiák szervezése és
a szervezés technológiái: az online civil
szervezodés fobb mufaji formái Kelet-Európában.”
Információs Társadalom, 2005/1.
Regional
governance, civil society, and EU projects
Laszlo Bruszt
Balazs Vedres
Project
description:
This
project is about the impact of EU regional development grant
systems on regional governance structures, especially the
emergent project organization of civil society. We use surveys
and case studies to understand emerging regional identities,
new forms of project networks, and the impacts of winning
EU grants.
Research
grants:
A research grant within the FP6 scheme of the European Union.
Publications:
2007
Laszlo Bruszt, and Balazs Vedres. “The Politics
of Civic Combinations” in: Victor Perez Diaz (editor):
Markets and Civil Society. Berghahn Books, New York
(forthcoming).
