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Firms and governments are inextricably related. They, consequently, influence each other’s decisions and performance. To deal with this interdependence and obtain the best possible policies for their business interests, it is thus natural that firms engage in politics. The literatures on non-market strategy and on corporate political activities have extensively analyzed how activities such as campaign donations and lobbying and more relational forms of political engagement, such political connections, affect firm performance. However, a consensus on the direction of such a relationship has not yet been reached. Indeed, some studies find that political engagement affects firm performance positively, while others find a negative or neutral effect (Faccio, 2006; Fisman, 2001; Sun, Mellahi, & Wright, 2012). This suggests the need for a better understanding of the mechanisms through which firm political engagement—political connections in particular—might affect firm performance.

Three Essays on the Influence of Political Connections on Firm International Expansion Strategy