Politically valued resources and preferred outcomes: Does the political context matter?

• Date: 01 February 2019
• DOI: http://doi.org/10.1002/pa.1877
• Published date: 01 February 2019

ACADEMIC PAPER

Politically valued resources and preferred outcomes: Does the

political context matter?

Nicholas Bailey

1

|Kurt Norder

2

1

College of Business Administration,

University of Northern Iowa, Cedar Falls, Iowa

2

Alfred Lerner College of Business &

Economics, University of Delaware, Newark,

Delaware

Correspondence

Nicholas Bailey, Assistant Professor of

Management, University of Northern Iowa,

246 Curris Building, Cedar Falls, 50614 IA.

Email: nick.bailey@uni.edu

Previous research has concluded that ownership of economic resources that are polit-

ically valued leads to preferential outcomes during interactions with government offi-

cials. However, how the political context, and specifically the roles of the government

actors involved, influences the relationship between political valued resources (PVRs)

and desired outcomes has to date been relatively unexplored. In our paper, we argue

that in interactions with elected legislators, PVRs are much more likely to lead to pref-

erential outcomes. Conversely, due to the lack of power these resources have with

bureaucrats in charge of regulatory enforcement, PVRs are less likely to lead to pref-

erential outcomes. We provide some support for our arguments by looking for

shifting patterns of effects in outcome variables that typically fall under the jurisdic-

tion of each political role type. We find that large firms, export firms, and technology

firms largely report having favorable influence over laws and regulations due to lobby-

ing and increased foreign ownership, while also spending more days in inspections

and more managerial time dealing with regulations.

1|INTRODUCTION

The interactions between firms and governmental actors at various

levels is an increasingly important issue for managers in both domestic

and international business contexts (Hillman, Keim, & Schuler, 2004).

According to the World Bank (2013), senior managers in developing

countries spend over an hour each day dealing with government regu-

lations. Thus, even small improvements in political outcomes can yield

significant benefits. The focus of this paper centers on the power

government actors wield within their respective roles in determining

the influence of politically valued economic resources (PVRs) on firm

preferential outcomes.

Previous scholarship is largely in agreement that firms possessing

PVRs will be able to achieve preferential results even across various

types of outcomes (Galang, 2012; Mahoney, 2007). First, the work

studying proactive attempts to change rules and laws via corporate

political activity (CPA) suggests companies can parlay their firm‐

specific resources into advantageous political outcomes (Clougherty,

2004; Delios & Henisz, 2003; Vaaler, 2008).

1

Second, the bargaining

power (BP) literature, looking at relative firm–government negotiating

positions, argues that firm‐specific economic resources lead to better

bargaining outcomes due to perceived political benefit that stems

from the creation of jobs, knowledge spillovers, and favorable

balances in the country's current account, among others (Li,

Newenham‐Kahindi, Shapiro, & Chen, 2013; Moon & Lado, 2000).

Third, the public policy literature also largely concurs with a significant

body of research concluding that private entities with significant

financial and other resources are likely to increase their ability to align

public policy with their interests, all else equal (Chong & Gradstein,

2007; Mahoney, 2007; Nielsen, 2006).

This past work has been instrumental in our understanding of the

relationship between ownership of PVRs and desired outcomes in

firm–government interactions. However, these studies often make

simplifying assumptions, which limit our understanding of the bound-

ary conditions of benefits from PVRs. First, many tend to assume that

all government role types operate under similar conditions; hence, the

influence of PVRs is thought to be consistent. However, we know

from the political science literature that each type of government

actor role, from law‐making to law implementing and enforcing, has

unique responsibilities and jurisdictions (Desbordes & Vauday, 2007;

Przeworski, Stokes, & Manin, 1999). We argue these differences cre-

ate power asymmetries that can have a significant moderating influ-

ence on the ability to leverage PVRs into preferred outcomes.

Second, although other scholars (see Holburn & Vanden Bergh,

Received: 23 March 2018 Revised: 25 June 2018 Accepted: 27 September 2018

DOI: 10.1002/pa.1877

J Public Affairs. 2019;19:e1877.

https://doi.org/10.1002/pa.1877

© 2018 John Wiley & Sons, Ltd.wileyonlinelibrary.com/journal/pa 1of8