Organizational slack, entrepreneurial orientation, and corporate political activity: From the behavioral theory of the firm

Abstract

As a popular non-market strategy, corporate political activity (CPA) benefits a firm’s risk management and competitive advantage. However, the mechanism of promoting firms to engage in corporate political activity remains obscure. Based on the behavioral theory of the firm, this research develops a mediation model containing organization slack, entrepreneurial orientation, and corporate political activity to investigate the prediction effect of different types of slack, as well as the mediation effect of different dimensions of entrepreneurial orientation. Based on the multiple informant data from 303 firms in China, this research conducted ordinary least-squares estimation with SPSS and post hoc analysis with PROCESS. The results support the main and key hypotheses. First, entrepreneurial orientation plays a mediation effect between slack and corporate political activity. Second, financial slack provides stronger support to develop certain capabilities than operational slack. Third, two sub-dimensions of entrepreneurial orientation play heterogeneous mediation effects according to their different emphasis. Managerial attitude also mediates the effect of entrepreneurial behavior effect toward CPA. This research enriches the antecedent research of CPA, deepens our understanding of the CPA engagement mechanism, and extends the behavioral theory of the firm.