Corporate Political Contributions and the Allocation of U.S. Federal Procurement

Abstract

This paper aims to determine the extent to which corporate political contributions and the allocation of government procurement contracts are related. We gather information regarding the contributions made by 911 S&P500 companies in 9 congressional election cycles between 1993 and 2010, and study subsequent government procurements. We find that making a contribution, especially to congressional candidates from the Democratic Party, is associated with a considerably higher likelihood of subsequently receiving a procurement contract. On average, a marginal contribution of 1 dollar is associated with 410 dollars in marginal procurements. Companies that contribute to a larger number of candidates subsequently get more procurement contract value. Furthermore, we show that the effects of contributions are persistent over time, that they vary strongly across industries and do not have negative spillovers on firm profitability regardless of the amount.