The authors apply the issue life cycle model to analyze the 1999 through 2001 dispute between the Securities and Exchange Commission and the accounting profession concerning auditor independence. The analysis also brings additional insights that extend understanding of the issue life cycle and issues development. This analysis highlights the roles of a trigger event, the shift of an issue from a technical concern to a public debate, and likely recurrence. The reappearance of the auditor independence issue in 2002 with accounting (...) scandals is consistent with the article’s findings and highlights the use of the issue life cycle model and issue evolution. (shrink)

We review articles about corporate political activity published in Business & Society since its beginnings 60 years ago and in a set of other leading management journals over the past decade. We present evidence that most studies of CPA use the political markets’ perspective. Under the premise that the contemporary political environment has changed significantly since the inception of the political markets’ perspective, our review asks two interconnected questions. First, to what degree have changes in the political environment challenged the (...) ability of the political markets’ perspective to understand the pillars of politics: issues, institutions, interests, and information? Second, to what degree have CPA scholars augmented or diversified their theoretical arguments to accommodate these changes in the political environment? We document the CPA literature across these dimensions and questions and note that many scholars are already adopting other theories side by side with the political markets’ perspective. (shrink)

Research on corporate political activity has considered a number of antecedents to a firm’s engagement in politics. The majority of this research has focused on either industry or firm-level motivations that lead to corporate political activity, leaving the role of the firm’s leader noticeably absent in such scholarship. This article combines ideas from Upper Echelons Theory with research in corporate political activity to bridge this important gap. More specifically, this research utilizes CEO demographic characteristics to determine whether a firm will (...) invest in political activity and how these characteristics influence the particular approach to political activity the firm undertakes. Considering 27 years of data from large U.S. firms, we find that a CEO’s age, tenure, functional, and educational backgrounds influence whether and how the firm invests in political activity. (shrink)

This article explores the substitution and complementary effects between political and social strategies on firm performance in the context of an emerging market (EM). Using in‐depth, historical case‐study approach, the article investigates how companies integrate political and social resources in this market. Corporate performance includes traditional measures, such as accounting performance and nonfinancial measures like the ease of doing business. The study finds that social strategies are stronger enablers of firm long‐term performance than political strategies. The latter have a short‐term (...) impact on performance, but their success over time is limited. The main drawback of reliance on political resources in EMs is the lack of political stability, fragmented polity, and weak political coalitions. We identify rather limited evidence of firms using these two strategies as complements. Thus, we suggest that firms should employ both these strategies in the EM. (shrink)

Research on firm initial public offering (IPO) performance has primarily utilized an economics of information perspective, which assumes that publicly available information is incorporated into a stock’s price when it is issued. However, the valuation process associated with IPOs remains manifest with considerable uncertainty for the prospective investor. This study argues that corporate political activity undertaken prior to the firm’s IPO acts as a signal to investors, reducing the uncertainty the market places on the value of the firm’s equity. Utilizing (...) a sample of 180 IPOs, we show that the more a firm invests in corporate political activity prior to its IPO, the better its IPO performance. These findings provide evidence that corporate political activity acts as a nonmarket signal, influencing investor behavior by reducing the information asymmetries between investors and the target firm. (shrink)

Given corporate lobbying’s double-edged nature, previous research has been interested in what motivates firms to engage in lobbying. In this study, we build on previous works to analyze how two types of aspiration, historical aspiration, which represents the level of performance firms aim to achieve given past self-performance, and social aspiration, which represents the level of performance firms aim to achieve given competitors’ achievements, shape corporate lobbying decisions. Our premise is that when a firm’s product market performance is below historical (...) aspirations, then the firm is motivated to engage in lobbying because the benefits of lobbying outweigh the potential costs. However, when a firm’s product market performance is below social aspirations, then decision-makers perceive that the potential challenges of lobbying outweigh the benefits and decide not to engage in lobbying. By examining automotive firms in the U.S. light vehicle market from 1998 to 2013, we find significant empirical support for our general premise. Using Tobit regression analysis, we find that automotive firms present diverging motivations for lobbying depending on whether they attend to historical or social aspirations for sales performance. (shrink)

This study integrates the research on corporate political strategy and corporate governance. Using the agency theory perspective, this study examines how corporate governance mechanisms such as institutional ownership, insider ownership, and long-term executive compensation affect a firm’s political strategy approach. This study proposes that an agency problem may occur between owners and managers in regard to firms’ approach to corporate political strategy. Since a relational approach to corporate political strategy, such as establishing a government relations office in Washington, DC, requires (...) significant resource commitments without guaranteeing a favorable policy change, shareholders might be reluctant to approve such an approach. In a sample of 3,417 U.S. manufacturing firms, over 5 years of data, the results show that institutional ownership and insider ownership are negatively associated with firms’ propensity to engage in a relational approach to political strategy. (shrink)