Towards a Political Theory of the Firm

This article argues that firms are significant political as well as economic actors, with considerable power to shape the rules of the game within which they compete. Fillling in the gap in the prevailing theory of the firm, which ignores the elements of politics and power, Zingales outlines the risk of a “Medici vicious circle,” and how this risk depends on several non-market factors.  He develops a framework for understanding corporate political behavior as endogenous to market systems, emphasizing how firms influence governance structures, competition, and distributional outcomes.