Corporate political activity and firm performance - a systematic review

• Main Author: Liedong, Tahiru Azaaviele
• Other Authors: Rajwani, Tazeeb
• Language: en
• Published: Cranfield University 2013
• Subjects: corporate political activity; firm performance; CIMO-logic; systematic review
• Online Access: http://dspace.lib.cranfield.ac.uk/handle/1826/8065

Corporate political activity (CPA) has been recognized as a source of sustainable competitive advantage. Its proponents, mostly nonmarket strategy researchers, argue that political capital enables firms to influence their regulatory and policy environments, shape their competitive space, and improve their performance. Consequently, there is a widely held view that the performance of firms depends not only on the ability of managers to exploit economic markets but also on their ability to succeed in political markets. To test the value of political activism, recent scholarship has probed the relationship between CPA and firm performance. However, random mixed findings and the fragmented nature of the field raise more questions than provide answers to the nature of this relationship. This systematic review examines scholarly articles for evidence of the impact of CPA on firm value. Drawing on 56 articles contributing to the topic and applying the CIMO-logic method of synthesis, this study discusses the findings within a framework of four elements. First, it examines the contexts within which CPA has been investigated. Second, it presents findings on the strategies that are studied. Third, it investigates the performance outcomes of CPA. Fourth, it explores the mechanisms that underpin the performance outcomes of CPA. The findings suggest that CPA is positively related to firm performance, an indication that there is value in political activism. However, counter evidence is reported by a few studies. The evidence also reveals that institutional contexts impact the political strategies used by firms or studied by researchers. Even though most of the studies lack theoretical grounding, social capital, cronyism and agency relationships are the popularly cited or implied mechanisms underlying the CPA-firm performance relationship. Following from the discussion, two propositions linking contexts, interventions, and outcomes are developed. The study suggests future research directions based on the gaps/limitations identified in the literature.