Political market performance and corporate political activity

Abstract

PurposeThis study aims to examine conditions in which firm political market performance is associated with firm efforts to influence regulatory outcomes. Applying measures of political market performance based on firm performance in government enforcement actions and a firm’s ability to obtain favorable political outcomes, the authors make the case that political market performance is a key part of competitive political markets, which is associated with particular types of firm efforts to influence policy.Design/methodology/approachLongitudinal examination of nine automobile manufacturers during National Highway Traffic and Safety Administration crash tests reveals that firm performance in government enforcement activities is associated with greater efforts to cooperate with political suppliers, while declining firm performance in efforts to influence political outcomes is associated with increased firm opposition to political supplier actions.FindingsFirm performance in government enforcement activities is associated with greater efforts to cooperate with political suppliers, while declining firm performance in efforts to influence political outcomes is associated with increased firm opposition to political supplier actions.Research limitations/implicationsPerformance in regulatory enforcement results in increased firm actions to engage regulators in the policy-making process, while performance in obtaining desired policy outcomes is associated with a greater focus on opposition to proposed standards. These results suggest that political demanders can take deliberate actions to either engage or oppose supplier actions based on political market performance.Originality/valueThe primary contribution of this research is to begin to examine the implications of performance dynamics within political markets. Adding the construct of political market performance to the political markets framework reveals that variations in political market performance can be associated with specific types of corporate political activity.