New research on firms with high influence on policymaking

Since about the 1990s, strategic management scholars have been interested in how business firms influence government and whether that influence improves the performance of the firm.

A newly-published study contributes to this body of work by examining associations between a firm’s perception of its influence on government and characteristics of the firm, its industry, and its country of operation.

Influencing Public Policymaking: Firm-, Industry-, and Country-level Determinants (paywall) by Jeffrey T. Macher and John W. Mayo (both at Georgetown University’s McDonough School of Business in Washington, DC) utilizes data from the World Business Environment Survey and describes several factors associated with firms that report themselves as having high influence on government policymaking.

The analysis finds that, compared to firms perceiving themselves as having little influence on policymaking, firms perceiving themselves as having more influence also tend to have the following characteristics:

  • larger in size
  • in industries with fewer competitors
  • in countries where the government notifies firms of potential changes in regulation before the changes occur
  • executives spend more time with policymakers
  • have operations in multiple countries
  • not be in the manufacturing sector
  • not be in countries whose legal system originated in German civil law
  • be in countries where government is perceived to be interested in business input into policymaking
  • in countries where corruption constrains business operations

The authors note that few of these results are surprising. However, while the data and methodology enable investigation of associations between perceived policymaking influence and various factors, they do not enable investigation of the causes of these associations. The authors clearly note this avenue for future research:

We cannot eliminate the potential that developed relationships between firms and government branches improve firms’ public policymaking influence, rather than the firm- and industry-level factors that we suggest. It might be the case that politically powerful firms become larger and subsequently alter industry structure–thereby increasing their policymaking influence–over time (p. 2035, emphasis added).

Other scholars of corporate political activity have noted the need for more research on how firms engage with policy to shape policy to their strengths, thereby increasing their performance and their policymaking influence in a virtuous cycle for the firm (e.g. Lux, Crook, & Woehr, 2011). It is an exciting area for future research on the relationship between business and politics.

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