Beyond Political Markets: Corporate Political Activity, Policy Maker Motivations, and Societal Outcomes

Abstract

Government influence over firm outcomes can be determinative. Firms’ attempts to gain influence over this process through corporate political activity (CPA) is attracting growing interest from management scholars. Management research on this topic has conceived of CPA as a political market wherein firms offer resources to policy makers in exchange for advantageous policies. However, this conception of CPA has proved to suffer from key theoretical and empirical shortcomings. The political markets view represents an undertheorized framework which neglects the motivations of policy makers, and empirical findings do not support its predictions. Furthermore, while the literature has focused on firm-level outcomes, the societal effects and legitimacy of CPA remains an open question. This dissertation consists of three essays which seek to address these shortcomings of the CPA literature. The first essay is a conceptual study offering a new framework for CPA success that centres the role of policy maker motivations. Here, I draw on social influence theory to develop a model of CPA that integrates a fuller spectrum of policy maker motivations, how firms appeal to them, and how these appeals differ based on whether the policy maker is a politician or a bureaucrat. The second essay is an empirical study that seeks to extend CPA theory by examining the role of policymaker morality in determining the influence of political donations. Using within-firm fixed effects analysis, I demonstrate that when firms donate to politicians who are higher on the moral foundations of authority/subversion and loyalty/betrayal, they gain better policy outcomes, and that this effect is stronger during crisis. The third essay seeks to expand the research on CPA by looking at CPA's influence on societal rather than firm outcomes. Using Ordinary Least Squares multiple regression, the results indicate that states with greater marginalized populations had worse COVID-19 outcomes in states where political donations are legal. Together, these essays offer a view of CPA that is more complete as both a firm strategy and as a societal phenomenon.