Maintaining or Altering the Status Quo in the Nonmarket Arena: Theory and Evidence from Government Contract Disputes

Abstract

We develop a theory that considers important differences in competition in the political arena based on whether firms are attempting to maintain or alter the status quo. Particularly, we argue that although investing resources and time to build relationships with politicians and government officials fosters trust, solidarity, and reciprocity, likely producing desired outcomes for both firms attempting to maintain the status quo and those trying to alter it, such relationships are more strongly positive for firms maintaining the status quo. As the effectiveness of relational strategies may differ based on firms’ political strategies and firm characteristics, we then theorize that the effects of a more relational approach on ”winning” these desired outcomes for firms seeking to maintain or alter the status quo will be moderated by (1) prior targeting in the political arena where the competition unfolds and (2) a firm’s social reputation. Specifically, we argue that knowledge and relationships from prior targeting in a political domain where competition unfolds, and a firm’s better social reputation will strengthen the effect of a more relational approach on securing desired outcomes for both firms seeking to maintain and alter the status quo. We expect the moderating effect for a firm’s targeting and social reputation will be stronger for firms seeking to maintain the status quo compared with firms seeking to alter the status quo. Our study contributes to corporate political activity literature and notably to the research on political markets by advancing a more nuanced but realistic understanding of interfirm rivalry for governmental outcomes.