One Voice, But Whose Voice? Exploring What Drives Trade Association Activity

Abstract

Trade associations operate under the premise of advancing the shared interests of their member firms. How well do they fulfill this role? In this paper, I measure the activity of 148 major industry trade associations over time and relate this activity to the performance of the relevant industries and dominant firms within them. Findings suggest that trade association spending increases when the profitability of the four largest firms in an industry decreases but spending is unrelated to the profitability of the industry overall. This implies that large firms exert control over trade association agendas and may use these communal organizations to advance their own interests rather than the shared interests of the entire industry. Moreover, it points to the need for further development of the currently anemic management literature on the activities of trade associations.

Keywords: trade associations, collective action, cooperative strategy, industry effects

JEL Classification: L44, D70