Corporate political activities, or corporate attempts to shape government policy in ways favorable to the firm, are commonly employed by firms across countries. We review recent scholarly work from management, political science, economics and sociology in the area of corporate political activity (CPA), paying particular attention to the literature published since Shaffer’s [Shaffer, B. 1995. Firm-level responses to government regulation: Theoretical and research approaches. Journal of Management, 21: 495–514] review. To integrate this literature we provide a model of the antecedents of CPA, the different types of CPA, how firms organize to implement CPA and the outcomes of CPA both for public policy and firm performance. We conclude our review by proposing an agenda for future research in the area.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Academy of Management is collaborating with JSTOR to digitize, preserve and extend access to The Academy of Management Journal.In a constantly changing business environment, firms with access to those who make public policy enjoy competitive advantage. To gain such access, politically active firms engage in a variety of tactics. Modeling the determinants of corporate political activity as a single, multivariate phenomenon, we demonstrate that politically active firms combine tactics. We also show that political activism, institutional features of Congress, firm size, government contracts, and industry concentration drive firms to use multiple political tactics.Spurred by globalization and technological development, firms search feverishly for sources of competitive advantage. One such source, long recognized but seldom emphasized, is government policy, which determines the rules of commerce; the structure of markets (through barriers to entry and changes in cost structures due to regulations, subsidies, and taxation); the offerings of goods and services that are permissible; and the sizes of markets based on government subsidies and purchases. Consequently, gaining and maintaining access to those who make public policy may well be a firm's single most important political goal (Clawson, Neustadtl, Access provides information that helps businesses anticipate changes in the policy environment. It is the prerequisite for building strategic alliances with legislators and regulators. Access is also said to increase a firm's ability to survive by decreasing uncertainty in the political domain We thank for their comments and suggestions on earlier versions. We also thank Scott Baggett, Kathy Ensor, and Rice University's Statistical Computing Lab for their assistance. Lou Ann Matossian and Geoffrey Carson also contributed to this article. Finally, we thank Thomas Lee and the three anonymous referees of AMJ. Any remaining errors are our own.

Although many believe that companies' political activities improve their bottom line, empirical studies have not consistently borne this out. We investigate the relationship between corporate political activity (CPA) and financial returns on a set of 943 S&P 1500 firms between 1998 to 2008. We find that firms' political investments are negatively associated with market performance and cumulative political investments worsen both market and accounting performance. Firms placing former public officials on their boards experienced inferior market performance and similar accounting performance than firms without such board members. We find, however, that CPA is positively associated with market performance for firms in regulated industries. Our results challenge the profit‐maximizing assumptions underlying CPA research and focus on agency theory to better understand CPA. Copyright © 2012 John Wiley & Sons, Ltd.

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