Green Product Portfolio and Environmental Lobbying

Abstract

Nowadays, a growing number of firms utilize corporate lobbying in favor of more environmental-friendly policies and regulations, deviating from the traditional lobbying mainly used to minimize regulatory burdens. In this study, we investigate what motivates firms to engage in such an unusual type of corporate lobbying—environmental lobbying. Focusing on the product portfolio strategy of the firms, we suggest that firms increasing their production of “green products” are more likely to engage in environmental lobbying. When environmental lobbying raises environmental hurdles in the market, firms with intensive focus on green products can easily bear adjustment costs with little effort, making other “less green” firms relatively disadvantaged under the newly regulated market conditions. Moreover, those firms can also address demand-side issues more easily by lobbying the government to provide greater incentives for purchasing green products or to request subsidies that can be used to improve their cost structure. Our analyses based on the U.S. light vehicle market indicate that, indeed, the more electric vehicles automakers produce in their product portfolios, the greater environmental lobbying they make. We also find that such a positive relationship between green product intensity and environmental lobbying becomes more salient when a firm has greater market share.