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This paper investigates the effect of state-society relations on the industrially-related growth paths of developed countries.

It introduces a novel theoretical framework, the state-business-labor relations (SBLR) framework, where four main actors are identified: the state, big businesspersons or tycoons, owners and managers of small and medium enterprises (SMEs) or Entrepreneurs and labor. Different SBLR categories or modes are introduced depending on levels of coordination and power relations between the studied actors. The paper then investigates how these SBLR modes, through adopting various policies targeting the industrial sector, lead to different growth paths. Rather than focusing only on economic growth, this research regards a growth path as a matrix of the performance in long-run growth and equality of distribution.

Using regression analysis and statistical data, the results suggest that the Co-Balanced mode, having higher levels of coordination and lower favoritism, leads to the best growth path among the four introduced modes, especially with its emphasis on high levels of venture capital availability and easiness of starting business. while the Lib-Capture mode, characterized by lower coordination and higher favoritism, seems to have the worst growth path and the best implemented policy for this mode is suggested to be high profit taxes that seem to counter the negative impact of the existing high levels of favoritism.

Despite the important findings that this research has reached, this paper is mainly meant to open a further investigation into this topic and open this dimension that the research on VoC and political economy have under-researched. A deeper investigation of SBLR typologies that could only be possible by having richer datasets with more data on coordination for the whole world, rather than only the advanced economies, would further our understanding of the dynamics that shape the growth paths of different countries of the world.

To realize the best industrial growth path, fighting favoritism should be an important objective. The negative impact of favoritism on innovation could not be disregarded in the eve of the fourth industrial revolution, where innovation is increasingly pivotal to future industrial development. Actively engaging societal groups in the policymaking process is important in addressing their concerns and balancing them at the same time. This should lead to the double benefit of formulating better policies that should foster growth as well as provide better distribution of this growth. High levels of coordination should help in realizing this objective. Yet, this could only be possible if societal groups are free to associate and aggregate their power and when there are means of preventing one actor from gaining more favorite treatment and exclusive influence over policymakers. The presence of both powerful and broadly represented business associations and labor unions and the existence of a government interested in coordinating their efforts-rather than letting itself be controlled by one group at the expense of the others-should help in the realization of the best growth path. Thus, institutional reform that empowers societal groups and enables them to defend their interests as well as fights all forms of corruption should lead to the realization of a more prosperous and equitable industrial development, with the “re-industrialization” of the developed world being no exception. The technological and social challenges of intensive automation and digitalization accompanying the fourth industrial revolution make the envisaged institutional reform more urgent.

This paper is introducing a novel theoretical framework for studying the effect of state-society relations, particularly SBLR, on the industrial growth paths of developed countries. It integrates three important bodies of literature in order to build a more comprehensive understanding of the dynamics of state-society relations and their economic consequences. These are the Varieties of Capitalism (VoC), State-Business Relations (SBR) and Industrial Relations. The SBLR framework differentiates between tycoons and entrepreneurs, an important distinction that often goes unnoticed. Different SBLR categories or modes are introduced, depending on levels of coordination and power relations between the actors. It is proposed in this research that the effect on growth paths goes beyond the simple dichotomy between CMEs and LMEs usually present in the literature of VoC and that power relations provide an essential complementary dimension in explaining this causality.

This paper investigates the factors responsible for the emergence of different arrangements of state–society relations. Being concerned with the relations related to the industrial sector, this study focuses more on state–business–labor relations (SBLRs), especially on power dynamics between the main actors in these relations, namely, the state, tycoons, entrepreneurs and labor.

Based on power dynamics, four SBLR modes are identified and differentiated according to state power vis-à-vis non-state actors and tycoon power vis-à-vis the other non-state actors. The balanced mode is characterized by balanced power relations among the four considered actors. In the capture mode, tycoons are more powerful than other actors, including the state, although other nonsocial actors have organizational rights. The crony mode has powerful state, subservient tycoons who enjoy high levels of favoritism and low organizational power for the other social actors. Finally, the state-dominance mode has powerful state, low levels of favoritism to tycoons and low organizational power for all social actors. The paper then explores the factors responsible for the emergence of each of these modes by investigating the factors’ effects on state power and favoritism to tycoons. The investigated factors include historical political–economic, geographical, legal and cultural factors. The hypothesized effects of these factors are then tested using a random-effects probit regression model, investigating how the different factors affect the probability of the existence of the studied SBLR modes.

The results support much of the hypothesized relations and place more emphasis on some of the investigated factors. Earlier development is clearly responsible for the emergence of either the balanced or the state-capture SBLR mode. Geographical conditions favorable for development, such as latitude and metal richness, also lead to the emergence of either mode. The communist heritage, and more accurately the post-communist economic and incomplete political liberalism of the transition stage, contributed to the emergence of the state-capture SBLR mode. The British legal system, with the power it provides to non-state actors through the independence of judges and other measures, contributes to the emergence of the balanced SBLR mode. Cultural factors are largely responsible for the emergence of the crony SBLR mode, especially hierarchical and collectivist cultures, as well as ethnic fractionalization. On the other hand, the culture of Confucians has the strongest influence on the emergence of state dominance, while other cultures play a marginal role in its rise, and ethnic fractionalization marginally defuses the ability of the state to dominate without resorting to favoritism. Finally, access to rich natural resources, by enriching the state independently from social actors’ financial resources (e.g. taxation), marginally increases the probability of the emergence of the state-dominance mode.

There is room for path dependency to explain the emergence of different SBLR modes in many countries. Unfortunately, the introduced regression model and any quantitative empirical work would not be able to effectively investigate such a process. Instead, an approach depending on case studies and a deeper investigation of country-specific historical political development is needed to complement the research done here. Conducting such an additional quest would help in reaching a more comprehensive understanding of why different countries have different SBLR modes. This should ultimately help in answering an equally important question: How to reverse engineer the emergence of favorable SBLR modes?

Although this paper did not investigate the economic merits or mischiefs of each of the studied modes, it is plausible to think of the balanced SBLR as the best mode. This is supported not only by the fact that most of the countries of this mode are developed countries but also by the attractiveness of the power dynamics governing this mode—a more balanced power among different SBLR actors. While some factors are almost impossible to replicate, for example, geographical factors, reform could target the factors that could be changed or mitigated. This is true for legal reform, especially for fostering the independence of judges. Culture is often regarded as a sticky institution. However, this is not always true, even though the change happens in the long run. A sort of dynamism should always be considered when referring to culture through time and space. Institutional reform could be instrumental in the long run in this regard. Conducting such reform with the help of such “exogenous” institutions should always consider the match between these institutions and “endogenous” institutions, such as culture. That is to say, the connection between democratization, fostering accountability and curbing favoritism and cultural values leaning toward these principles should be firmly established. Finally, a point of optimism is that—based on the results of this paper—reaching a high state of development could increase the chances of realizing a more balanced SBLR mode in the long run.

This paper represents a novel contribution to a topic that has hardly been addressed in the literature. The methodology that is used identifies different state–society relation modes and focuses on power relations in SBLRs is another important contribution to the present literature in many fields, such as institutional economics, socioeconomics and political economy.

The aim of this paper is to revisit the Brazilian case in an effort to shed light on how state-business relations have been transformed in the contemporary era of globalization. Brazil has long been considered the archetype of “dependent development”, having served as the inspiration for the classic theory of the relationship between states and capital in the semi-peripheral states of the developing world. Since the theory of dependent development was initially formulated in the 1970s, however, both the Brazilian political economy and the global context in which it is situated have changed dramatically.

The analysis draws on 15 months of field research conducted in Sao Paulo, Brasilia, Beijing, New Delhi and Washington, as well as at the World Trade Organization (WTO) in Geneva, involving 157 interviews with senior government officials, trade negotiators and representatives of industry and non-governmental organizations, ethnographic observation and extensive documentary research.

The author shows how the emergence of a highly competitive export-oriented agribusiness sector in Brazil has prompted the expansion and internationalization of domestic capital, leading to the emergence of an independent, private sector lobby with considerable influence on the Brazilian state. Driven by the rise of Brazilian agribusiness, the state and capital have allied together to aggressively pursue the expansion of markets for Brazilian exports, specifically through dispute settlement and negotiations at the WTO.

These findings challenge conventional understandings of state-business relations in emerging economies such as Brazil.

This chapter explores how state–business relations (SBR) in the Arab world influence public policy on industrial clusters and the resulting economic benefits from these clusters on innovation and productivity. The main SBR actors are identified as the state, big capitalists (or tycoons), and small and medium business managers and owners (entrepreneurs). The framework used here focuses on interactors' power relations. Such power relations are reflected in the ability/inability of the state to enforce its will with less consultation with and/or favorite treatment to nonstate actors. It is also reflected in the ability/inability of nonstate actors to act individually or organize in order to defend their interests and influence government policy formulation and implementation. Such power relations are reflected in the ability of nonstate actors to organize – especially entrepreneurs – and the level of favoritism provided by state officials to tycoons. The power dynamics in SBR lead to different SBR modes and different economic outcomes, one of which is the development of industrial clusters and how efficient they are in fostering innovation and productivity in Arab countries. This chapter suggests that the development of industrial clusters in the Arab world necessitates institutional reform, addressing the power relations governing SBR in the region. A more open political system allowing the independence and growth of broad-based business associations and curbing favoritism is necessary for realizing the benefits from implementing recommended policies, leading to cluster development and reaping the economic benefits from such development. Using statistical and regression analysis, empirical evidence supporting these arguments is provided.

In this paper, we regard public procurement as an instrument used by the government for indirect support of enterprises. In this context, we have investigated the place that public procurement occupy in statebusiness interrelations. Using data from a large survey of Russian manufacturing enterprises conducted in 2009 we show that in Russia public procurement cannot be regarded as a component in the system of exchanges, and the extent of combination between direct and indirect support depends on the level of government. At the federal level direct and indirect instruments of government support complement each other. At the regional and local levels the effect of mutual complementation can be observed only in relations with firms, which conceal information about their ownership structure and are supposedly affiliated with regional and local bureaucrats. In relations with other firms at regional and local levels direct and indirect support substitutes each other.

The purpose of this paper is to investigate whether formal State Business Relations (F-SBR) lead to economic growth and which institutional variables are responsible for their success in achieving this.

Following a theoretical analysis, several hypotheses are presented, and a number of different regression models are being used to test the hypotheses.

The paper finds that F-SBR with high government representation and business participation are likely to increase investment flows as well as help overcome some burdensome institutional settings. This could be done thanks to building trust, enhancing information exchange and better policy formulation. Despite of its suggested trust-building capacity, F-SBR seem to fail to function in cultures where trust in governments is low, since trust is a key issue for cooperation as that expected in F-SBR. On the other hand, collective but also non-hierarchical cultures that foster cooperation seem to help in the success of F-SBR. Accountability to the public and openness to various societal groups as well as good regulatory quality would help F-SBR in leading to better economic outcomes.

This paper, thus, suggests supporting the establishment of F-SBR with high official representation and business participation because of their positive economic value. It also suggests that voice and accountability and regulatory quality are important institutions for the realization of better economic outcomes from F-SBR.

The theoretical and empirical approaches used in this paper are what make it a novel endeavor in this field. Much of the suggested hypotheses were hardly discussed thoroughly elsewhere in the literature on F-SBR. Moreover, the proxy used for F-SBR, constructed by the interaction term of government official representation and the level of business representation, made it possible to conduct empirical testing on a global level, something barely done in works on F-SBR experiences worldwide. The obtained results supported some of the arguments uttered in the literature while raising questions on others, opening the field for future research on the matter.

Effective business and investment climate can lead to a higher rate of investment, profits and improved productivity, through the creation of an institutional environment, where the state provides high-quality public goods. This study aims to explore the impact of the business–investment climate on firm performance in a sample of six countries in the Middle East and North Africa (MENA) region and Turkey. Furthermore, we extend our analysis to explore the impact of business–investment climate on the resource misallocation in Egypt and Turkey.

The study used fixed effects models to investigate the relationship between the business and investment climate, expressed by the obstacles in state–business relations- and the firm performance, which is measured by the firm's value-added, the labour productivity and the total factor productivity To reduce the endogeneity coming from possible reverse causality and the perceptions about the business climate, an instrumental variables (IV) approach applying the two-stage least squares (2SLS) method was followed. The empirical analysis relies on data derived from the World Bank Enterprise Surveys.

Based on estimates, the obstacles in business climate may reduce the firm performance measures by 15–40%. These findings indicate the importance of quality in the business climate and how the improvement in its efficiency can have a very considerable positive impact on firms' performance and thus on the overall economic growth of a country.

This is the first study exploring the impact of business–investment climate on various measures of the firm performance and the resource misallocation in a large sample of countries in the MENA region.