The influence of political ties on firm outcomes under political hazard conditions: A longitudinal research on the Turkish electricity industry between 2004 and 2015

Corporate Political Ties (CPTs) play a key role in firms as their non-market activity. Thus, the corporate political tie has received considerable attention in recent years. In these studies, the political connections of firms are classified as formal and informal connections. This classification, on the other hand, based on the economic developmental level of the countries in general. Accordingly, while formal connections prevail in the developed countries, informal connections are typical for the developing countries in which crony capitalism is dominant. However, this economic-based view oversimplifies the nature of CPTs. On the other hand, a growing body of evidence suggests positive, negative and mixed values of the CPTs for the firms. In general, it has been showed that CPTs' positive effects on firm outcomes may change into negative in regard to contextual, organizational or market factors. These studies are generally conducted in the countries which experience a transition in the economy or an unexpected change in the political actors. However, no known empirical research has focused on the impact of ties on firm outcomes in a context in which the change in the political environment occurs incrementally. The principal objective of this project, therefore, to investigate the nature of political connections from a macro institutional perspective and the CPT-firm outcome relation in a political environment where the change occurs gradually. This study provides a novel approach to explore the context-specific nature of CPTs by considering the macro determinants in the Turkish electricity sector between 2004-2015. Relatedly, the results show that within a state-dependent framework CPTs have two structural dimensions namely tie-intensity and tie-depth. The principal finding of this research is that, while tie-intensity have a positive effect on firm outcomes, its impact turns into negative with the empowerment of the ruling party. Furthermore, tie- depth's impact is positive when the ruling party increases its political power, otherwise, it doesn't have a significant effect on firm outcomes. The present results support the mixed value of CPTs with its contribution that, this contingency not only depends on the radical changes of political environment or transitions in the economy but also on the incremental changes in the environment. Furthermore, it has been shown that the dimensional structure of CPT also influential on the mixed value of CPTs. Key words: non-market activities, corporate political ties, national business system, statedependent business system