Do Trade Associations Matter to Corporate Strategies?
64 Pages Posted: 21 Sep 2023 Last revised: 27 Nov 2024
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: Suggested Citation