The Dynamics of Firm Lobbying

45 Pages Posted: 4 Nov 2011 Last revised: 28 Oct 2014

See all articles by William Kerr

William Kerr

Harvard University - Entrepreneurial Management Unit

William Fabius Lincoln

Claremont McKenna College - Robert Day School of Economics and Finance

Prachi Mishra

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 3 versions of this paper

Date Written: November 2011

Abstract

We study the determinants of the dynamics of firm lobbying behavior using a panel data set covering 1998-2006. Our data exhibit three striking facts: (i) few firms lobby, (ii) lobbying status is strongly associated with firm size, and (iii) lobbying status is highly persistent over time. Estimating a model of a firm's decision to engage in lobbying, we find significant evidence that up-front costs associated with entering the political process help explain all three facts. We then exploit a natural experiment in the expiration in legislation surrounding the H-1B visa cap for high-skilled immigrant workers to study how these costs affect firms' responses to policy changes. We find that companies primarily adjusted on the intensive margin: the firms that began to lobby for immigration were those who were sensitive to H-1B policy changes and who were already advocating for other issues, rather than firms that became involved in lobbying anew. For a firm already lobbying, the response is determined by the importance of the issue to the firm's business rather than the scale of the firm's prior lobbying efforts. These results support the existence of significant barriers to entry in the lobbying process.

Suggested Citation

Kerr, William R. and Lincoln, William Fabius and Mishra, Prachi, The Dynamics of Firm Lobbying (November 2011). NBER Working Paper No. w17577. Available at SSRN: https://ssrn.com/abstract=1954503

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

William Fabius Lincoln

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

Prachi Mishra

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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