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We study whether and when firms' donations to political parties induce favouritism in public procurement allocations. Our analysis builds on a unique, comprehensive dataset covering all public procurement contracts and all corporate donations to major political parties in the Czech Republic over the period 2007-2014, and exploits changes in political control over regional governments within this period for identication purposes. We find that firms donating 10% more to a political party gaining (losing) power witness an increase (decrease) in the value of their public procurement contracts by 0.5 to 0.6%. Importantly, however, these gains from political donations only arise for contracts allocated under less restrictive procurement allocation processes. Politicians' discretionary power thus presents a crucial moderating factor for the impact of political donations on the procurement process.
