Insider lobbying and government contracts: The moderating role of firm size

Abstract

This study examines insider lobbying as a form of relational Corporate Political Activity (CPA) that can be used by firms to gain an advantage in the competition for government contracts, and how firm size moderates the effectiveness of different insider lobbying strategies. Drawing on a unique dataset that captures meetings between private companies and British government ministers, we find that both the breadth and depth of insider lobbying are positively related to the value of the contracts awarded by the UK Ministry of Defence. Further analysis reveals that the benefits from a strategy of lobbying depth are stronger for small firms, than those from a strategy of lobbying breadth. The findings suggest that the bridging and bonding social capital cultivated through meetings with politicians can be deployed in alternative ways by different‐sized firms.

Bringing home the bacon: do politicians on boards increase firms’ government contracts?

“…Using panel data for the S&P 500 from 2006, Ferris et al (2019 found that increased levels of political contributions resulted in more favorable contract terms for firms. Alonso and Andrews (2022) collected data on meetings between private firm officials and government ministers to examine the relationship of insider lobbying on gaining a competitive advantage in government contracts in the UK. Both the insider lobbying breadth (extent of government activities or entities the firm is attempting to influence) and depth (concentrated on a small number of relationships that can be exploited) were positively related to the value of contracts awarded by the UK Ministry of Defense.…”

“…This relationship can be seen as so close that one study used government contracts as a proxy for political connections (Ngo and Susnjara, 2020). Corporate political activity researchers view political connections as a strategic tool firms can use to gain a competitive advantage and improve performance (Alonso and Andrews, 2022). From the resource dependency theory perspective, political connections can be a valuable resource (Zona et al , 2018).…”

“…There have been several studies on the relationship between corporate political ties and government contracts. This includes research in countries such as Brazil (Boas et al , 2014), the UK(Alonso and Andrews, 2022) and the Czech Republic (Titl and Geys, 2019). One study on 220 S&Ps and Toronto Stock Exchange companies in Canada found that, during 2010 to 2014, politically connected firms were significantly more likely to earn government contracts than nonconnected firms (Dicko, 2016).…”

“…Corporate political activity researchers view political connections as a strategy firms can use to gain a competitive advantage and improve performance (Alonso and Andrews, 2022). One benefit of adding former political officials to corporate boards is that they often possess specific knowledge or insight into the political processes or about potential future regulations for the firm or industry.…”

The Impact of Government Official Assessment on Ecological Poverty Alleviation: Evidence from Chinese Listed Companies

“…To return the favor, politicians provide resources to firms to ‘reward’ the support from businessmen [ 63 , 64 , 65 ]. For example, firms that construct political connections may obtain more favorable contract amounts [ 16 ], incentives in the renegotiation of government contracts [ 66 ], obtain a cheaper price in land deals [ 15 ] and receive the benefit of government contracts [ 67 , 68 , 69 ]. Based on the above theoretical analysis, this paper argues that local government officials are likely to use their political relationships and strong social mobilization power to drive companies to participate in poverty alleviation.…”