Two Faces of Corporate Lobbying: Evidence from the Pharmaceutical Industry

The North American Journal of Economics and Finance, October 2018

Posted: 31 May 2019

See all articles by Omer Unsal

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

Date Written: October 8, 2018

Abstract

In this study, we examine how political connections increase firms’ innovation performance. By examining firm-level lobbying activities, we find that political connections lead to a greater number of medical breakthroughs among pharmaceutical firms in our sample. We then examine the underlying ways that political connections enhance innovation among medical firms. Using hand-collected data on government subsidies, we find that politically connected firms have a higher chance of receiving subsidies from federal, state, or local government agencies. These government subsidies enhance medical innovation by insulating managers from short-term threats and mitigate their career concerns by creating a “failure tolerant” environment. Overall, we show that connections between firms and politicians come with increased innovation outcomes.

Keywords: Corporate lobbying, FDA approval, Innovation, Government subsidy

JEL Classification: D72, Q31, Q32, Q55

Suggested Citation

Unsal, Omer, Two Faces of Corporate Lobbying: Evidence from the Pharmaceutical Industry (October 8, 2018). The North American Journal of Economics and Finance, October 2018, Available at SSRN: https://ssrn.com/abstract=3384795

Omer Unsal (Contact Author)

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

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