Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-27T16:55:13.276Z Has data issue: false hasContentIssue false
  • English
  • Français

Asset freezing, corporate political resources and the Tullock paradox

Published online by Cambridge University Press:  20 January 2017

Jean-Philippe Bonardi  and
Santiago Urbiztondo
Santiago Urbiztondo
Affiliation:
Fundación de Investigaciones Económicas Latinoamericanas (FIEL), Argentina
Get access Rights & Permissions [Opens in a new window]

Abstract

In 1967, Gordon Tullock asked why firms do not spend more on campaign contributions, despite the large rents that could be generated from political activities. We suggest in this paper that part of the puzzle could come from the fact that one important type of political activity has been neglected by the literature which focuses on campaign contributions or political connections. We call this neglected activity “asset freezing”: situations in which firms delay lay-offs or invest in specific technologies to support local politicians’ re-election objectives. In doing so, firms bear a potentially significant cost as they do not use a portion of their economic assets in the most efficient or productive way. The purpose of this paper is to provide a first theoretical exploration of this phenomenon. Building on the literature on corporate political resources, we argue that a firm's economic assets can be evaluated based on their degree of “political freezability,” which depends on the flexibility of their use and on their value for policy-makers. We then develop a simple model in which financial contributions and freezing assets are alternative options for a firm willing to lawfully influence public policy-making, and derive some of our initial hypotheses more formally.

Type
Research Article
Information
Business and Politics , Volume 15 , Issue 3 , October 2013 , pp. 275 - 293
Copyright
Copyright © V.K. Aggarwal 2013 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ansolabehere, S., Snyder, J. M. Jr. and Tripathi, M. 2002. “Are PAC Contributions and Lobbying Linked? New Evidence from the 1995 Lobby Disclosure Act.” Business and Politics 4 (2): 131–155.Google Scholar
Ansolabehere, S., de Figueiredo, J. M., and Snyder, J. M. 2003. “Why is There So Little Money in U.S. Politics?” Journal of Economic Perspectives 17: 105–130.Google Scholar
Baldwin, R. and Robert-Nicoud, F. 2007. “Entry and Asymmetric Lobbying: Why Governments Pick Losers?” Journal of the European Economic Association 5 (5): 1064–1093.Google Scholar
Barney, J. 1991. “Firm Resources and Sustained Competitive Advantage.” Journal of Management 17: 99–120.Google Scholar
Baron, D. 1995. “Integrated strategy: Market and Political Components.” California Management Review 37: 47–65.Google Scholar
Baron, D. P. 2001. “Theories of Strategic Nonmarket Participation: Majority-Rule and Executive Institutions.” Journal of Economics and Management Strategy 10 (1): 46–89.Google Scholar
Baron, D. 2003. Business and its Environment. Upper Saddle River, NJ: Prentice Hall.Google Scholar
Bertrand, M., Kramarz, F., Schoar, A., and Thesmar, D. 2006. “Politicians, Firms and the Business Cycle. Working Paper.Google Scholar
Bonardi, J. P. 1999. “Market and Nonmarket Strategies of a Former Monopoly During Deregulation: the British Telecom Case.” Business and Politics 1 (2): 203–232.Google Scholar
Bonardi, J. P. 2004. “Global and Political Strategies in Deregulated Industries: The Asymmetric Behaviors of Former Monopolies.” Strategic Management Journal 25: 101–120.Google Scholar
Bonardi, J. P. 2008. “The Internal Limits to Firms’ Nonmarket Activities.” European Management Review 5: 165–174.Google Scholar
Bonardi, J. P. 2011. “Corporate Political Resources and the Resource-Based View of the Firm.” Strategic Organization 9 (3): 247–255.Google Scholar
Bonardi, J. P., Holburn, G., and Vanden Bergh, R. 2006. Nonmarket Performance: Evidence from U.S. Electric Utilities. Academy of Management Journal 49 (6): 1209–1228.Google Scholar
Brainard, L. and Verdier, T. 1997. The Political Economy of Declining Industries: Senescent Industry Collapse Revisited. Journal of International Economics 42: 221–237.Google Scholar
Dahan, N. 2005a. “A Contribution to the Conceptualization of Political Resources Utilized in Corporate Political Action.” Journal of Public Affairs 5: 43–55.CrossRefGoogle Scholar
Dahan, N. 2005b. “Can There be a Resource-Based View of Politics? International Studies of Management and Organization 35 (2): 8–27.Google Scholar
Dari-Mattiacci, G. and Parisi, F. 2005. “Rents, Dissipation and Lost Treasure: Rethinking Tullock Paradox. Public Choice 124 (3, 4): 411–422.Google Scholar
Dean, T. J., and Brown, R. L. 1995. “Pollution Regulation as a Barrier to New Firms Entry: Initial Evidence and Implications for Future Research.” Academy of Management Journal 38 (1): 288–303.Google Scholar
Faccio, M. 2006. “Politically Connected Firms.” American Economic Review 96: 369–386.CrossRefGoogle Scholar
Ghemawat, P. and del Sol, P. 1998. “Commitment Versus Flexibility?” California Management Review 40 (4): 26–42.Google Scholar
Hazlett, T. W. and Michaels, R. J. 1993. “The Cost of Rent-Seeking: Evidence from Cellular Telephone License Lotteries.” Southern Economic Journal 59: 425–435.Google Scholar
Hillman, A. 2005. “Politicians on the Board of Directors: Do Connections Affect the Bottom Line?” Journal of Management. 31: 1–18.Google Scholar
Hillman, A., Zardkoohi, A., and Bierman, L. 1999. “Corporate Political Strategies and Firm Performance: Indications of Firm-Specific Benefits from Personal Service in the U.S. Government.” Strategic Management Journal 20: 67–81.Google Scholar
Holburn, G. and Zelner, B. 2010. “Political Capabilities, Policy Risk, and International Investment Strategy: Evidence from the Global Electric Power Generation Industry.” Strategic Management Journal 31 (12): 1290–1315.Google Scholar
Keim, G. and Baysinger, B. 1988. “The Efficacy of Business Political Activity: Competitive Considerations in a Principal-Agent Context.” Journal of Management 14 (2): 163–80.Google Scholar
Lawton, T. and Rajwani, T. 2011. “Designing Lobbying Capabilities: Managerial Choices in Unpredictable Environments.” European Business Review 23 (2): 167–189.Google Scholar
Milyo, J., Primo, D., and Groseclose, T. 2000. “Corporate PAC Campaign Contributions in Perspective.” Business and Politics 2 (1): 75–88.Google Scholar
Oliver, C. and Holzinger, I. 2008. “The Effectiveness of Strategic Political Management: A Dynamic Capabilities Framework.” Academy of Management Review 33 (2): 496–520.Google Scholar
Peteraf, M. 1993. “The Cornerstones of Competitive Advantage: A Resource-Based View.” Strategic Management Journal 14 (3): 179–191.Google Scholar
Rehbein, K. and Schuler, D. Forthcoming. “Linking Corporate Community Programs and Political Strategies: A Resource-Based View.” Business and Society.Google Scholar
Schuler, D. 1996. “Corporate Political Strategy and Foreign Competition: The Case of the Steel Industry.” Academy of Management Journal 39: 720–737.CrossRefGoogle Scholar
Stratmann, T. 1991. “What Do Campaign Contributions Buy? Deciphering Causal Effects of Money and Votes.” Southern Economic Journal 57: 606–620.Google Scholar
Tullock, G. 1967. “The Welfare Cost of Tariffs, Monopolies and Theft.” Western Economic Journal 5: 224–232.Google Scholar
Tullock, G. 1972. “The Purchase of Politicians.” Western Economic Journal 10: 354–355.Google Scholar
Tullock, G. 1998. “Which Rectangle?” Public Choice 96: 405–410.Google Scholar
Yoffie, D, and Bergenstein, S. 1985. “Creating Political Advantage: the Rise of the Political Entrepreneur.” California Management Review 28: 124–139.Google Scholar