Would You Mind Tossing Me That Life Preserver? Corporate Political Activity and Firm Survival

Abstract

Research on firm-level performance outcomes of corporate political activity (CPA) has yielded mixed results. While theory convincingly argues that a firm should enjoy performance benefits associated with its investment in CPA, consistent empirical results have been more difficult to demonstrate. This paper argues that the lack of findings are a result of the mismatch between what a firm’s investment in CPA seeks to achieve and what policy makers can actually do. Leveraging ideas from institutional theory and resource dependence theory, this research proposes that a firm’s investment in CPA may yield the greatest benefits to the firm by enhancing its likelihood of survival while other firm’s that don’t invest in CPA are more likely to fail. Considering 27 years of data from large U.S. firms, we find that corporate lobbying and corporate PAC contributions enhance a firm’s survival probabilities. We also find that this relationship is strengthened when the firm’s CEO makes political contributions.