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The institutional perspective holds that institutional quality is critical for development. The microfoundations of institutional change literature is applied to our research to advance the notion that elite agency lies at the origin of institutional change. Elites are in the abstract coordination capacity achieved through the lower transaction costs of elite business models. We suggest a methodology to measure the novel concept of elite quality (EQ), that is, country¡¯s elites¡¯ propensity¨C on aggregate ¨C to create value, rather than rent seek. A four-level architecture allows for both an overall quantification of a country¡¯s EQ, as well as an in-depth analysis of specific political economy dimensions, such as elite power. The Elite Quality Index (EQx) is brought to life using data on 107 indicators for 151 countries. The EQx dataset has the potential to be applied to a variety of research questions. Incipient research shows that it negatively correlates with inequality measures, which might indicate that more powerful elites less inclined to run value creation business models will exacerbate inequality. A variety of robustness tests suggest that the EQx scores and ranking are robust to ceteris paribus changes in key modelling assumptions. Thus, the EQx offers a reliable framework and potentially a new tool to analyze the political economy of countries.

The EQx was published for 2020 and 2021, while the 2022 issue is planned for release in April. It aims at practical impact on firm strategy. Its ultimate goal is elite transformational leadership and to change how society thinks about economic policy, while placing the business model at the center of the sustainability conversation.

scoco@ceibs.edu