We Fly the Congressman – Market Actions as Corporate Political Strategy in the U.S. Airline Industry
37 Pages Posted: 10 Jun 2019
Date Written: April 30, 2019
The literature on corporate political strategy (CPS) assumes that nonmarket actions to influence political actors or institutions such as lobbying or campaign contributions are related but separate activities from market actions. This study puts forth that a firm’s core market actions in competitive environments such as market entry or geographic expansion can function as CPS as well. By expanding production or employment at the home district of an influential legislator who hold legislative or regulatory power over the industry, firms can claim for economic contribution to his/her district, and their employees at the distinct become a group of voters whose interests the legislator has to meet. This creates an incentive for the legislator to offer preferential policy and regulatory treatments for the firms. Our empirical analyses of data from the U.S. airline industry confirm the above proposition. Specifically, we find that an appointment of the Chair of the Transportation Committee in the U.S. Senate or the House of Representatives is associated with a significant increase in supply of flights from the airports in his/her home state or district, respectively. If one becomes the Speaker of the House or the Senate Majority Leader, there is an increase in supply of flights from his/her district or state to Washington, D.C., respectively.
Keywords: Airline Industry, Corporate Political Strategy, Market Actions, Geographic Expansion
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