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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Business Research, Volume 63, Issue 11, November 2010, Pages 1196–1201
This study explores how senior executives affect firms' propensity to engage in political activity. I propose that firms' participation in the political process depends on their senior executives' involvement in political activity. I examine this framework using data on the campaign contributions of 151 U.S. manufacturing firms during the years 1999–2002. The results suggest that senior executives' involvement in a particular political activity affects their firms' commitment to that political activity, contingent on CEO tenure and top management team heterogeneity.
Increasing complexity and uncertainty in the competitive environment have made it difficult for firms to rely solely on market-oriented strategies. Recently, they have started acknowledging the potential benefits of nonmarket strategies for their competitive advantages (Bonardi, 2008), using a number of activities and tactics to influence public policies (Baron, 1995 and Ozer and Lee, 2009). Prior literature has established the importance of corporate political activities, defined as the proactive actions of firms to influence public policy environment in a favorable way (Baysinger, 1984) (for a review, see Hillman et al., 2004). Increasingly, scholars have focused on the question of why firms pursue corporate political activities (Esty and Caves, 1983, Getz, 2002, Grier et al., 1994, Hart, 2001, Mitchell et al., 1997 and Schuler, 1996). Research on the engagement of firms in political activity is growing, but prior studies have mainly focused on broad industry-level influences on corporate political activity. Specifically, research on political activity in political science and economics argues that firms engage in political activity due to outside pressures (Olson, 1965 and Stigler, 1971). These studies have been grounded in several theoretical perspectives which include interest group theory (Dahl, 1961 and Lowi, 1969), public choice theory (Buchanan and Tullock, 1962), and collective action theory (Olson, 1965). These theories assume that firms engage in political activity as a response to activities of other firms/groups in the political arena. As a result, research driven by these theories treats “business” as a single coalition and contends that “business” works collectively as a social class to secure its own interests (Epstein, 1969 and Getz, 1997). While these studies provide compelling arguments that industry-level factors influence corporate political involvement, they do not take into account how executives shape their firms' commitment to particular political actions. Their focus on macro-level factors and treatment of “business” as a unified class prevents the consideration of executive influence on firms' propensity to shape their political environment. However, a firm's involvement in political activity may be fundamentally driven by executives' decisions. For instance, senior executives decide the amount of resources allocated for corporate political activity (Griffin and Dunn, 2004 and Wilts, 2006). Senior executives may also recognize public policy issues and interpret their salience to corporate interests (Wilts, 2006). Therefore, the firm's engagement of political activity can be a reflection of interaction between the firm's senior executives. Accordingly, corporate political activity can be actively shaped within the firm. These two perspectives differ in terms of their assumptions about whether senior executives significantly influence their firms' participation in political activity or whether macro-level factors are more influential and limit the influence of senior executives. Although the role of macro-level factors on corporate political activity has been widely studied, the influence of senior executives on corporate political activity has only received very limited attention. Thus, little is known about the role of the top management team (TMT) (defined as all top-level executives including the chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), and executive vice presidents) (Finkelstein and Hambrick, 1996) on their firms' political activities. Accordingly, the purpose of this study is to examine whether the TMT members' involvement in political action directly affects their firms' commitment to political action. This study makes several contributions to the corporate political activity literature. First, it builds on upper echelons theory (Hambrick and Mason, 1984) by incorporating the TMT into corporate political activity research as a factor affecting corporate political involvement. This illustrates that TMTs take proactive roles in shaping and controlling their political environment. Second, this study contributes to a deeper understanding of how TMTs can opt to manage their political environment. Rather than relying on public affairs managers, TMTs may consider corporate political activities one of their strategic choices in the decision-making process. Third, this study shows that CEO tenure and TMT heterogeneity moderate the relationship between TMT involvement in political activity and firms' commitment to political activity, extending the existing literature on corporate political activity by arguing that there may be intra-firm variations in firms' commitment to political action. The hypotheses of this study are empirically tested using a unique dataset from the financial contributions of 151 U.S. manufacturing firms and their senior executives to political action committees (PAC) during the time period from 1999 to 2002.
نتیجه گیری انگلیسی
The purpose of this study is to understand the extent to which TMT involvement could help explain firms' engagement in the political process. This analysis builds on upper echelons theory (Hambrick and Mason, 1984) and focuses on the effects of TMTs on firms' propensity to invest in corporate political activity. The results confirm that TMT involvement in political action does affect their firms' participation in the political process. Indeed, the results show that TMTs play a significant role in shaping firms' response to their political environment. This research contributes to the corporate political activity literature in three folds. First, the upper echelons theory applied here provides insights into the managerial influence on a firm's engagement in political action. Upper echelons theory has not typically been used for examining corporate political activity, yet this study illustrates its value in explaining firms' propensity to participate in the political process. Consistent with the assumptions of upper echelons theory, the findings show that TMTs play a prominent role in shaping decisions with regard to corporate political activity. Prior studies have provided useful insights into the factors affecting firms' propensity to invest in political activities, but research that focuses on firm- and industry-level factors assumes that firms decide to engage in corporate political activities uniformly. As the results of this study demonstrate, firms may differ in their commitments to investing in corporate political activities depending on CEO and TMT characteristics. The implication is that research on corporate political activity must look beyond firm- and industry-level factors and focus inside the firm to examine the question of why firms participate in political activities. For instance, Hart (2004) suggests that firms are not unitary and senior executives may have different personal preferences for specific corporate political activities. Griffin and Dunn (2004) also find a positive relationship between senior management commitment and the resources allocated to corporate public affairs departments. The results of Blumentritt's (2003) study indicate that management teams with a strong orientation toward government affairs are more willing to allocate the resources necessary for carrying out these activities. Second, this study also contributes to the literature on corporate political activity by indicating how TMTs and their actions affect the way firms manage their political environment. As Hart (2004) notes, TMTs take political action into consideration as a part of their corporate activity, contrary to the premise that TMTs rely on their public affairs managers for political action. Finally, my findings suggest that CEO tenure strengthens the relationship between TMT involvement in political activity and their firms' commitment to that political activity. CEOs with long-term tenure recognize how changes in the political environment impact their firm's strategies and convince other TMT members to allocate resources for political activity. This result is consistent with prior research suggesting that CEO tenure plays a prominent role in strategic decision-making process (Carpenter et al., 2001 and Herrmann and Datta, 2002). This study has several limitations which suggest new directions for future research. First, the measure of corporate political activity is limited to PAC contributions; however, there are a variety of other measures of corporate political activity such as lobbying, soft money contributions, and constituency building (Getz, 2002). Limiting this study to PAC contributions clearly simplifies the analyses, yet those conducting future research should further study the research question using other measures of corporate political activity. Another concern about PAC contributions is that previous studies contend that PAC contributions may generate little influence over policy makers (Ansolabehere et al., 2003). The choice of this measurement of the dependent variable is primarily driven by the difficulty in obtaining an objective measurement of the effects of TMT corporate political activity. Scholars may consider qualitative studies such as surveys and case studies to indicate TMT involvement in political action, exemplifying additional aspects of involvement such as using personal networks, advocating specific issues, and bestowing time. Also, it is important to note that the sample of this study includes only the manufacturing industry, limiting the ability to generalize the results of this study to other industries. Future research may test the theory presented here in different industries. Fourth, this study is restricted to one characteristic of CEOs, CEO tenure. Future research may examine the roles of other CEO characteristics such as age, educational background, functional background, and compensation. Researchers find that these characteristics of CEOs have implications for a firm's strategic decisions such as diversification, performance, and international expansion (Bantel and Jackson, 1989 and Finkelstein and Hambrick, 1996), and future research should logically seek the potential impact of these characteristics on the relationship between TMT involvement in political activity and their firms' investment in that political activity. Fifth, this study includes a few TMT heterogeneity variables such as tenure, gender, and age diversity. In future studies it may be useful to examine other TMT characteristics such as functional and educational background heterogeneity. Further, two election periods are used in this study which do not allow us for causal interpretations among the variables. Future studies can benefit from a longitudinal research design that examines the effects of CEO and TMT characteristics on the relationship between TMT involvement in political activity and firms' commitment to that activity over time. Finally, future research could make important contributions by incorporating ownership structure as another moderating variable, providing a better understanding of TMT involvement in political activity. Prior research shows that founding family ownership may affect a firm's decision to engage in political action (Hadani, 2007). Future studies could investigate the effectiveness of TMT involvement in political activity. Although there is a growing body of research on the effectiveness of political activity (Bonardi et al., 2006, Faccio, 2006, Faccio, 2007, Fisman, 2001 and Hillman et al., 1999), very little is known about the potential benefits of political activity. Future research could consider whether TMT involvement in political activity will benefit firms to create value and improve overall performance. This will provide a rich understanding of the influence of senior executives on corporate political activity. This study contributes to our understanding of how TMTs play a significant role in managing their political environment. The upper echelons theory proposed here suggests that TMTs may affect the degree of their firms' commitment to political activity by interpreting the salience of political activity as a part of their corporate activity and allocating the necessary resources to implement that activity.