Board Of Thrones: Towards a Comprehensive Theory of the Value of Political Co-optation

Because prior research has documented inconsistent findings on whether the appointment of politicians on the board creates firm value or not, we develop a comprehensive model of the contingent value of such political co-optation that is both finer-grained and more comprehensive than those available in the literature. We unpack the value-creating potential of political co-optation in terms of the type of benefits it may bring to firms, the functional attributes of the politicians appointed, and the institutional context in which co-optation takes place. Using an event study methodology comprising 353 appointment events in the largest 1,063 firms in 14 developed economies from 2001 to 2010, we find that political co-optation is best understood as a generic rather than a specific dependence-management strategy, that local rather than national politicians create most value for firms, and that political co-optation is more value-enhancing in countries in which government plays a more active role in the economy. Our findings not only contribute to the political co-optation literature specifically, but also to resource dependence theory more generally.