2026 Theses Doctoral

Power, Profits, and Votes: Essays on the Political Economy of Firm-State Interdependence in the 21st Century

Vilalta, David

This dissertation studies the political economy of firms in the 21st century, a period in which economic activity is increasingly shaped by globalization, social divisions and (geo)political shocks. While traditional models were built on a contested but clear separation between the private and public spheres, in the 21st century these boundaries have become increasingly blurred. Today, the "de-spatialization" of services through technology, the integration of deep global supply chains, and the strategic use of political human capital have transformed corporations into central political intermediaries. In this new landscape, firms are no longer mere subjects of regulation; they are active participants that reshape the social fabric and condition political attitudes. Bringing together three essays, this dissertation explores the "circular" interdependence between business and politics in present times: it argues that while firms are increasingly vulnerable to systemic geopolitical shocks, they simultaneously produce profound political consequences through their market decisions and navigate institutional constraints through non-market strategies that can carry significant democratic costs.

The first essay studies how the retreat or reconfiguration of private services can generate political backlash. Focusing on bank branch closures in Spain, it argues that the disappearance of salient private services is experienced as a signal of abandonment. Bank branches (especially in smaller, more rural and aging communities) serve as visible markers whose presence symbolizes inclusion in economic life and whose closure symbolizes withdrawal. Exploiting plausibly exogenous variation in branch closures associated with post-merger restructuring, the essay documents that areas exposed to branch closures increase their support for populist electoral options. The results are consistent with a mechanism in which firm decisions (even when undertaken for commercial reasons) reshape the political geography of discontent by changing what citizens infer about their community’s economic prospects and status. More broadly, the essay contributes to debates on populism and spatial inequality by showing how market-driven transformations can have unintended political consequences that go beyond the direct economic and demographic effect.

The second essay turns to the opposite direction of causality: how politics (specifically geopolitical shocks) affects firms, and how scholars should measure that exposure. It argues that prevailing approaches to firm-level geopolitical risk often conflate distinct sources of risk, obscuring heterogeneity in how firms interpret uncertainty and how they respond. The essay develops a new framework that distinguishes between geopolitical risks originating in a firm’s home environment and those originating abroad. Conceptually, domestic geopolitical risk and international geopolitical risk differ in their channels and implications: domestic risk can threaten regulatory stability and the domestic business environment, while international risk can disrupt supply chains, market access, and cross-border operations. Empirically, the analysis shows that domestic and international risk are associated with systematically different corporate responses, implying that a single aggregated measure can mask the relationship between geopolitical uncertainty and firm behavior. By separating where risk comes from, the essay provides a tool for connecting geopolitical developments to micro-level firm effects.

The third essay examines how firms attempt to navigate politics through political connections. A large literature treats politically connected hiring as a generally valuable form of political capital. This essay argues that such appointments can be interpreted through different lenses which generate opposite effects. It develops a framework that distinguishes between prospective appointments, understood as forward-looking investments in expertise, access, or managerial capability, and retrospective appointments, interpreted as rewards for past political favors or loyalty. Using a new dataset of political appointments and combining financial-market evidence with public-attitude outcomes, the essay shows that these categories generate sharply different reactions in markets. At the same time, they produce broadly negative reactions among citizens. Investors tend to reward appointments perceived as prospective and penalize those perceived as retrospective, consistent with the idea that markets price future value and not reliance on politics to remain competitive. By contrast, voter reactions are systematically negative and associated with lower trust in politics, showing the democratic externalities of firm activity. The essay therefore re-frames political connections as a dual phenomenon: they can generate private economic benefits under some conditions but simultaneously erode public confidence in democratic governance.

Taken together, the three essays characterize a contemporary political economy in which firms and politics affect and navigate each other. The first essay shows that firm decisions about the provision and location of services can have downstream political consequences. The second essay shows that political shocks affect firms in different ways depending on whether they originate domestically or internationally. The third essay shows how firms respond strategically to political uncertainty by investing in political ties, but that the returns to these strategies are conditional and may come at the expense of democratic legitimacy. The dissertation’s broader contribution is to integrate these dynamics into a single account of the 21st-century firm: a political actor that simultaneously transforms political attitudes, adapts to an unstable geopolitical environment, and employs non-market strategies that create a fundamental tension between corporate value and democratic legitimacy. By linking micro-level firm behavior to macro-level political outcomes, the dissertation advances research on political economy, public opinion, and business–politics relations, and highlights a central tension of contemporary capitalism: firms becoming more consequential for politics while at the same time being more vulnerable to political changes.