The Impact of Firm Relatedness on a Firm's Corporate Political Strategy: An Empirical Study of the United States Defence Industry

Moritz Duevel

Student thesis: Master thesis

Abstract

This thesis is an empirical study of the argument made by Hillman and Hitt (1999), who theorized that when firms aim to manage their regulatory environment by engaging in corporate political action, their choice between a relational and a transactional approach is, among other factors, determined by its extent of related diversification. While related firms are theorized to prefer to engage in a relational fashion, due to their opportunity to create “specialized political capital”, unrelated firms are expected to only engage transactionally. By conducting an empirical analysis based on the US defence industry, known to be an active user of CPA due to its high dependency on public resources, I found evidence for the validity of the theory established by the authors. Firm diversification relatedness is negatively correlated with expenditures on lobbying, a transactional form of CPA, while being positively correlated with former politicians on a firm’s corporate board, a relational one. The findings provide managers with important insights on the allocation of resources on CPA activities, and provide policymakers with recommendations on increasing effectiveness of the public procurement processes.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2021
Number of pages70
SupervisorsJoao Albino Pimentel