A Dark Side of Corporate Lobbying

Abstract

This paper studies the impacts of lobbying engagement on corporate innovation efforts. We find that more corporate lobbying activities causally impedes innovation, in contrast to the conventional stewardship perspective that lobbying brings government privileges. One percent increase in lobbying expenditures reduces the number of patents by 30 bps, the number of citations by 50 bps, and the average patent value by 50 bps. We explore two plausible mechanisms. We find that the effects of corporate lobbying on innovation are stronger in the subsamples where firms have more resources constraints and higher institutional ownership, which are consistent with both “resources constraints” and “lazy managers” hypotheses. The findings have important policy and economic implications to better understand the role of corporate lobbying in corporate growth.