Business Under the Tsar’s Gaze
In nineteenth-century Russia, firms existed at the Tsar’s pleasure. Private enterprise was possible — but never independent. In his Journal of Management article, Connected to a Sinking Ship? Firm Performance in a Besieged Autocracy (2025), Professor Christopher Hartwell examines the history of one of the empire’s largest transport companies, Kavkaz i Merkurii (Caucasus and Mercury).
At first glance, it was just a shipping company. In reality, it was an arm of the state. Its ships carried troops and supplies for imperial campaigns, and its management board included aristocrats and court officials. Profit depended not on customers but on contracts from St. Petersburg.
Hartwell situates tsarist Russia within the model of authoritarian capitalism — a system where private ownership exists, but the state dictates who prospers.
Profiting from Violence
The surprising finding of Hartwell’s study is that violence was not always bad for business. Using stock market data from 1865 to 1914, he shows that during wars, uprisings, and political assassinations, the share price of Kavkaz i Merkurii often rose.
For investors, turmoil meant more government demand for transport and logistics. Political chaos created opportunity—until the violence threatened the regime itself. When unrest endangered the Tsar’s rule, investors fled, and the company’s fortunes collapsed. Proximity to power, it turned out, was both an asset and a liability.
Between Survival and Subservience
Under the Tsar, no business could remain neutral. Political connections were essential, but they came at a cost. Kavkaz i Merkurii, though privately owned, sailed under the imperial coat of arms and acted as a de facto arm of the Russian Navy.
“Under authoritarian capitalism, firms must have the right friends — but they never know how long those friends will last.” — Christopher A. Hartwell
In an autocracy, friends often matter more than the law. It’s the network of personal connections — not institutions or contracts — that determines who can operate, invest, or trade. The problem is that in such systems, “friends” change faster than the rules themselves. A single loss of trust, a reshuffle at the top, or a political purge can turn yesterday’s favored partner into today’s outcast. As Hartwell shows, loyalty to the regime is the most valuable currency under authoritarian capitalism — but also the most unstable one.
The dilemma he described in tsarist Russia still echoes today. From Moscow to Beijing, companies must learn how to balance political loyalty with market logic. In systems where proximity to power defines success, the line between strategic partnership and dangerous dependency is perilously thin.
Authoritarian Capitalism Reborn
Although Hartwell’s research focuses on the nineteenth century, its implications are strikingly modern. Across China, Russia, and the Middle East, the boundary between state and market is once again blurring. Governments cultivate “national champions,” offering them protection and contracts — along with oversight and control.
The logic remains unchanged: economic power flows through political loyalty.
History as a Laboratory
Hartwell treats imperial Russia not as an anomaly but as a laboratory of authoritarian capitalism. Historical data — financial reports, stock returns, and records of political violence — become a way to understand how firms behave under repression.
His findings are clear:
- Political connections can bring profit but amplify volatility.
- Political violence may boost short-term returns but undermines long-term growth.
- Authoritarian capitalism doesn’t destroy markets — it captures them.
The New Map of Economic Power
The story of Kavkaz i Merkurii ends with the fall of the Tsar in 1917, as the new Bolshevik regime nationalized the company. Yet a century later, many firms face the same question: is closeness to power a guarantee of success — or the first step toward collapse?
Hartwell offers no easy answer. But his work reminds us that history often repeats itself — with new technologies, new markets, and new faces. The empire may have fallen, but its economic logic still shapes the world.
*** Based on Connected to a Sinking Ship? Firm Performance in a Besieged Autocracy by Christopher A. Hartwell, published in the Journal of Management (2025). The full version of the article is available at: https://journals.sagepub.com/doi/10.1177/01492063251359201
*** Christopher A. Hartwell is Professor of International Management at Kozminski University (Poland) and Professor of International Policy and Head of the International Management Institute at the School of Management and Law, Zurich University of Applied Sciences (ZHAW). A former President of the Center for Social and Economic Research (CASE) in Warsaw, he is a leading scholar of institutional and economic evolution and a recognized expert on the dynamics of transition economies.
His research explores the interplay between financial, political, and economic institutions and how these relationships shape growth and development. Over his career, he has advised governments in Kazakhstan, Ukraine, Armenia, Russia, Poland, Kosovo, and Tonga, and authored analytical reports for the European Parliament, DG Trade, and DG Regio.
Professor Hartwell’s work has appeared in leading academic journals, including the Journal of International Business Studies, Global Strategy Journal, Journal of Economic Behavior & Organization, Regional Studies, and the Cambridge Journal of Economics. He is also the author of Two Roads Diverge: The Transition Experience of Poland and Ukraine (Cambridge University Press, 2016), Institutional Barriers in the Transition to Market (Palgrave Macmillan, 2013), and Kazakhstan: Snow Leopard at the Crossroads (Routledge, 2023).
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Media contact: Paweł Siwek Science Communications Officer 📧 psiwek@kozminski.edu.pl 📞 +48 668 610 534
