Ownership Structure of the Firm as a Predictor of Intra-Industry Variation in Partisan Preferences

Abstract

Most scholars assume firms are politically unified - at least at the industry level. Yet recent contributions data reveal considerable variation in political preferences exhibited among firms in the same industry. This paper investigates what drives this intra-industry variation in partisan preferences by analyzing contributions of firms in fourteen diverse industries during the 2006 electoral cycle. Hypotheses are tested in order to explore whether ownership structure helps predict which firms will be the most partisan and the greatest deviators from their industry. The results suggest that firms with a principal owner deviate significantly more from their respective industry than firms without a principal owner, regardless of the source of capital. The findings suggest that the ownership structure of a firm, identifiable only through firm-level analysis, explains much of the variation in political behavior and therefore should be included in formal models and empirical studies of corporate behavior in the future.

Keywords: corporate political activity, campaign contributions, ownership structure, theory of the firm, partisan preferences

JEL Classification: L29, L19, G32, D21, D71