Disaggregating and Explaining Corporate Political Activity: Domestic and Foreign Corporations in National Politics

Abstract

Corporate political activity is usually operationalized and analyzed as financial contributions to candidates or political parties through political action committees (PACs). Very little attention has been paid to other dimensions, such as lobbying, in a systematic way. On a theoretical level we address the issue of how to conceive of PAC contributions, lobbying, and other corporate activities, such as charitable giving, in terms of the strategic behavior of corporations and the implications of “foreignness” for the different types of corporate political activity. On an empirical level we examine the political activities of Fortune 500 firms, along with an oversampling of U.S. affiliates of large foreign investors for the 1987–88 election cycle.

Corporate Political Activity: An Integrated Model

“…Most frequently identified motivators are related to value creation or value maintenance. The resource dependence perspective suggests that firms which depend on government for their revenues -sales or contracts, or firms in highly regulated industries in which regulation imposes significant cost burden on firms are more likely to engage in political activity (Hansen & Mitchell, 2000;Hart, 2001;Mitchell, Hansen, & Jepsen, 1997;Schuler, Schnietz, & Baggett, 2002;Schüler, 1999).…”

Corporate Environmental Performance and Lobbying

“…Existing empirical studies of corporate political activity have instead relied primarily on election campaign contributions through PACs (Brasher & Lowery, 2006;de Figueiredo & Tiller 2001;Hansen & Mitchell, 2000;Kim, 2008), which are considered to be a relatively poor indicator political activity (Hansen & Mitchell, 2000;Hansen, Mitchell, & Drope, 2005;Munger, 1988). It is also difficult to link a firm's campaign contribution to a specific political issue, such as environmental policy, as politicians typically run on a diverse platform of issues.…”

“…Nonetheless, with little exception, the empirical literature has paid scant attention to the relationship between environmental performance and political activity (Cho et al, 2006;Clark & Crawford, 2012;Kamieniecki, 2006). Until recently, empirical studies of corporate political activity have focused mostly on election campaign contributions via political action committees (PACs) to proxy political strategies and activity (Brasher & Lowery, 2006;de Figueiredo & Tiller, 2001;Hansen & Mitchell, 2000;Kim, 2008).…”

“…We use the two-step Heckman selection model, which is commonly used with lobbying data in the corporate political strategy and related literature (Brasher & Lowery, 2006;Hansen & Mitchell, 2000;Kim, 2008). As our sample includes only those firms that chose to lobby issues related to climate change, there is a high risk of selectivity.…”

Corporate Political Activity and Asset Pricing

“…Attempts have been made in the political science literature to disaggregate and explain different forms of corporate political activity (notably, Hansen and Mitchell (2000)), but there is a consensus among many researchers that differing measures of political involvement (such as lobbying, charitable giving, etc.) are highly correlated with each other and that using PAC activity as a proxy for overall levels of political involvement is therefore justified.…”