2025 Theses Doctoral

Production Complexity as Appropriation Protection

Ginis, Marnie

Scholars have long suggested that a technology gap between firms and developing countries protects firms' assets. How can we capture this intuitive idea that what firms make and how they make it affects their appropriation risk? And under what conditions would we expect firms to rely on a technology gap as a risk-mitigating strategy?

This dissertation aims to address these questions. I make three main arguments: First, firms' production complexity---the products they make and the process by which they make them---affects their relationship with governments. Second, production complexity can protect firms from appropriation by increasing the technical expertise bureaucrats need to appropriate. Third, bureaucratic capacity with respect to firms moderates the relationship between firms' production complexity and their appropriation risk.

This theory leads to two testable hypotheses: (1) bureaucratic capacity moderates the relationship between firms' production complexity and their appropriation risk and (2) in states with low bureaucratic capacity, firms with more complex production will have lower appropriation risk than firms with less complex production. I test these hypotheses by relying on both in-country interviews and firm-level panel data. The qualitative analysis draws on both cross-country variation in bureaucratic capacity and within-country variation in production complexity. The quantitative analysis holds bureaucratic capacity constant by focusing on one country, leveraging variation in firms' production complexity and their experiences with appropriation.

There are three key findings of this research. First, production complexity has a negative relationship with costs of appropriation to firms. Second, a lack of bureaucratic capacity with respect to firms is the causal mechanism driving this negative relationship. Third, production complexity has a positive relationship with bureaucrats' efforts to appropriate.

These findings demonstrate that production complexity is both a firm-level determinant of firms' appropriation risk and something firms can rely on to protect themselves from appropriation in contexts with low bureaucratic capacity. They also suggest that bureaucrats and firms play a ``cat-and-mouse game,'' where production complexity makes firms a target for appropriation, while also decreasing how much is actually appropriated. This dissertation contributes to research on firm-level determinants of appropriation risk; strategies firms use to protect themselves from appropriation; and the ways in which firms' protective strategies affect their political power and behavior, as well as states' capacity.