Do Trade Associations Matter to Corporate Strategies?

64 Pages Posted: 21 Sep 2023 Last revised: 27 Nov 2024

See all articles by Gerard Hoberg

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Ekaterina Neretina

Bocconi University - Department of Accounting

Date Written: September 18, 2023

Abstract

This paper uses textual analysis and plausibly exogenous instruments based on out-of-industry geographic connections and director networks to assess the role of trade associations in forming corporate strategies. Companies are most likely to join trade associations when they are older and larger, and when risk is lower and sales are declining. Joining associations then induces members to increase profits and markups, improve risk management, find acquisition partners and improve efficiency. To assess mechanisms regarding higher profits, we consider product pricing strategies and high dimensional analysis of market-exclusivity in how firms expand geographically across U.S. states. Overall, we find strong support for the conclusion that associations bring mutually beneficial gains to their members and their industries, and some evidence of an externality in the form of anti-competitive market-exclusion strategies.

Keywords: trade associations, networks, firm outcomes, risk-management, exclusive entry, geographic entry

JEL Classification: D71, G30, G32, L14, L44

Suggested Citation

Hoberg, Gerard and Neretina, Ekaterina, Do Trade Associations Matter to Corporate Strategies? (September 18, 2023). Available at SSRN: https://ssrn.com/abstract=4575314 or http://dx.doi.org/10.2139/ssrn.4575314

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://faculty.marshall.usc.edu/Gerard-Hoberg/

Ekaterina Neretina (Contact Author)

Bocconi University - Department of Accounting ( email )

Via Roentgen 1
Milan, 20136
Italy

HOME PAGE: http://https://www.katyaneretina.com

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