Nonmarket Strategies and Firm Competitiveness: CPA-CSR Interactions in the European Energy Sector

Abstract

This thesis investigates the effects of corporate political activity (CPA) and corporate social responsibility (CSR) intensity, both independently and in interaction, on financial performance (ROA) and innovation (annual patent publications) among 95 publicly listed EU energy firms from 2016 to 2024. Drawing on instrumental stakeholder theory expanded with insights from resource dependence theory (RDT), we measure CPA based on lobbying expenditures, European Parliament (EP) access passes, and lobbyist headcounts. We measure CSR using LSEG ESG scores. Using standardized CPA and CSR variables in panel OLS regressions with industry and year fixed effects (and one-year lags for innovation models), we find that higher CSR consistently increases financial performance and innovation. However, the effects of CPA vary by approach. More transactional lobbying expenditures increase ROA, while relational access measures spur innovation. Importantly, CPA and CSR largely act as strategic substitutes since each yields diminishing marginal returns as the other intensifies. This suggests that firms trade off the legitimacy gained from CSR and the political advantages gained from CPA rather than leveraging them synergistically. These findings challenge the common assumption of CPA and CSR complementarity, have important policy implications and provide firms with practical guidance on aligning CPA tools and CSR initiatives with performance and innovation goals.