Monarchies

The business case for monarchies

April 30, 2013: 5:00 AM ET

Monarchs can deliver competitive advantages to businesses operating in their respective realms.

By Jeroen Ansink

Queen Beatrix and Crown Prince Willem Alexander of The Netherlands

Dutch King Willem-Alexander and his mother, recently abdicated Queen Beatrix

FORTUNE – It's good to be the king. But, when it comes to a nation's economic health, it's also good to have a king -- or queen -- on hand. Monarchs open economic doors.

"In the presence of royalty, companies can enter circles they wouldn't be able to get in by themselves," says Angélique Heijl, deputy director of international economic affairs at VNO-NCW, the largest employers' organization in the Netherlands. "This holds particularly true for countries where the government plays a large role in the economy."

Monarchs typically serve their respective nations longer than democratically elected heads of state: The recently abdicated Dutch Queen Beatrix was on the throne for 33 years; Elizabeth II of Britain has held her position for 61 years and counting. This kind of leadership stability gives these particular figures additional sway in the business community.

"The presence of the queen gives a mission just a little bit more cachet," says Erik Oostwegel, vice-chair at engineering consultancy Royal HaskoningDHV, who joined Queen Beatrix on visits to Oman, Qatar, and the UAE.

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While the impact of these visits is hard to quantify, they do generate cultural, political, and economic benefits, says architect Ben van Berkel, whose agency UNStudio went along on a royal trip to Singapore. "For companies who already have established contacts, an essential benefit is that your clients become aware that you have royal and political support in your own country. This is extremely beneficial in generating trust."

"The use of the Queen, in a dignified capacity, is incalculable," wrote the 19th-century British businessman and editor-in-chief of The Economist Walter Bagehot in The English Constitution.

In a 2007 study, Harry van Dalen, economist at the Dutch University of Tilburg, attempted to determine the effects of a royal head of state on real GDP growth. Comparing World Bank data from constitutional monarchies with other forms of government, he concluded that, on average, the presence of a royal house accounts for 0.8 to 1.0 percentage points of additional economic growth. According to van Dalen, a ruler in a constitutional monarchy adds stability, efficiency, and social capital in the form of trust. In the case of the Netherlands, this "monarchy bonus" has added an estimated 4 to 5 billion euros to its 2006 GDP. Not a bad investment, considering the royal family's budget of roughly 100 million euros a year.

Dual-nation firms like Anglo-Dutch oil giant Royal Dutch Shell (RDSA) and Unilever (UL) have the option of traveling with two monarchs. However, the royal bump will only take you so far, says Wim van de Wiel, spokesman for Royal Dutch Shell. "In the end, it is still up to us to prove ourselves."

Just the same, monarchies do offer a competitive edge when it comes to international trade, especially with other kingdoms, says Herman Matthijs, political scientist and monarchy expert at the Belgian Universiteit Gent. "Royal visits to monarchies such as Thailand, the Gulf States, or Brunei bring in much more government contracts than those to countries like Vietnam or China. For instance, when the British government organizes a trade mission to the Persian Gulf, they send Prince Charles. He always comes back with enormous orders for the defense industry."

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As members of an exclusive club, royals feel connected to each other, even though differences between countries and political systems may be enormous. "Autocratic rulers may not like democracies," Matthijs says, "but they do look up to royal titles. If King Willem-Alexander decides to go to Riyadh, the Saudi King will want to see him that very night. He will probably pick him up from the airport personally. I don't see that happening to, say, the president of Italy."

This diplomatic equality allows small European monarchies to punch above their weight. Although nothing trumps a trade mission led by a U.S. president. "That opens all doors," says Matthijs.

Royal families also offer several branding lessons to businesses, says Harvard Business School marketing professor Stephen Greyser, who collaborated in a study of monarchies as corporate brands. "Monarchy is a symbol of nationhood and has a target market of a wide range of stakeholders. In that respect, they almost behave like corporations themselves."

Businesses can profit when a royal family endorses high-end domestic brands. "These forms of co-branding show that the monarchy is supporting national products competing in a global market," Greyser says.

Monarchies also inspire businesses to do good. "Members of the royal family are making countless appearances in support of various organizations, especially in the philanthropic realm," says Greyser. "Corporations engaging in charitable causes can certainly learn from that."

Companies that operate within monarchies can also be awarded royal designations, a remnant of Napoleon's reign over large swaths of Europe. This royal stamp of approval indicates that an enterprise is of impeccable integrity, has national importance, is a leader in its field, and has been around for at least a century. Such companies can also incorporate a crown in their logos.

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While a royal designation is considered somewhat old-fashioned in Western Europe, the effect is still tangible in the Middle East, says Oostwegel of Royal Haskoning. After designing the Port of Duqm in Oman, the company is aiming at developing its airports as well. "In those cases, it certainly helps to have a reputation as a solid and reliable partner."

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