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Firm‐level political capabilities and subsequent financial performance
Author(s) -
Brown Richard S.
Publication year - 2016
Publication title -
journal of public affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.221
H-Index - 20
eISSN - 1479-1854
pISSN - 1472-3891
DOI - 10.1002/pa.1592
Subject(s) - commit , politics , political action , political capital , action (physics) , return on assets , sample (material) , economics , capital (architecture) , finance , business , political science , law , chemistry , physics , archaeology , chromatography , quantum mechanics , database , profitability index , computer science , history
While there is a robust literature on corporate political activity, scholars have not adequately framed these activities as being part of a strategy to garner political capabilities. In this paper, we incorporate political capabilities and argue that those firms that more intensely commit resources to political activities have associated subsequent performance benefits. In a sample of 87 Fortune 500 firms from 2005 to 2011, we find that both political action committee and lobbying intensity were associated with higher return on invested capital and return on assets after controlling for other factors. Additionally, we find support that the cumulative effect of political action committee and lobbying intensity on performance is also significant. Finally, we moderate the main effects with industry concentration and find that returns are greater in more consolidated industries. Copyright © 2015 John Wiley & Sons, Ltd.