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<p>This study theorizes and tests whether hidden forms of political insulation shape corporate strategic behavior. It conceptualizes a corporate deep state as an enduring configuration of political embeddedness, ownership opacity, revolving-door appointments, and state-linked transactions. Drawing on resource dependence, agency, and entrenchment perspectives, the study argues that political insulation may do more than protect firms from environmental uncertainty. When it becomes deep, durable, and partially obscured, it may expand managerial discretion by weakening external discipline and improving access to political, regulatory, and financial resources. Using a panel of 36,182 firm-year observations from publicly listed firms in the United States and Europe between 2010 and 2022, the study develops a four-dimensional Corporate Deep State Index (CDSI) and investigates its association with acquisition frequency, leverage intensity, and lobbying expenditure. Fixed-effects Poisson, within-firm OLS, and PPML estimates indicate that a one-standard-deviation increase in CDSI is associated with a 13% increase in acquisition counts, a 1.8%-point increase in book leverage, and an approximately 15% increase in lobbying intensity. The findings remain stable across alternative index constructions, substitute outcome measures, instrumental-variable estimation, difference-in-differences analyses, dynamic GMM models, disclosure-sensitive subsamples, and placebo tests. The study extends the political-connections literature by showing that political access may become emboldening when it is embedded across multiple governance channels. It also advances agency and entrenchment perspectives by identifying political insulation as a mechanism through which external discipline may weaken. Overall, CDSI provides a distinct and measurable governance construct for explaining how politically embedded organizational structures influence corporate strategy, financial risk, and nonmarket behavior.</p>

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Hidden hands, bold moves: corporate deep-state structures and strategic risk

  • 期刊论文

  • 发表日期：

    2026年7月28日

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  • Hamzeh Al Amosh

摘要

This study theorizes and tests whether hidden forms of political insulation shape corporate strategic behavior. It conceptualizes a corporate deep state as an enduring configuration of political embeddedness, ownership opacity, revolving-door appointments, and state-linked transactions. Drawing on resource dependence, agency, and entrenchment perspectives, the study argues that political insulation may do more than protect firms from environmental uncertainty. When it becomes deep, durable, and partially obscured, it may expand managerial discretion by weakening external discipline and improving access to political, regulatory, and financial resources. Using a panel of 36,182 firm-year observations from publicly listed firms in the United States and Europe between 2010 and 2022, the study develops a four-dimensional Corporate Deep State Index (CDSI) and investigates its association with acquisition frequency, leverage intensity, and lobbying expenditure. Fixed-effects Poisson, within-firm OLS, and PPML estimates indicate that a one-standard-deviation increase in CDSI is associated with a 13% increase in acquisition counts, a 1.8%-point increase in book leverage, and an approximately 15% increase in lobbying intensity. The findings remain stable across alternative index constructions, substitute outcome measures, instrumental-variable estimation, difference-in-differences analyses, dynamic GMM models, disclosure-sensitive subsamples, and placebo tests. The study extends the political-connections literature by showing that political access may become emboldening when it is embedded across multiple governance channels. It also advances agency and entrenchment perspectives by identifying political insulation as a mechanism through which external discipline may weaken. Overall, CDSI provides a distinct and measurable governance construct for explaining how politically embedded organizational structures influence corporate strategy, financial risk, and nonmarket behavior.