Role of political connections in strategy execution: Project announcements and project costs
Description
While the extant literature has discussed the benefits that corporate political strategies provide to firms, the underlying mechanisms remain largely unexplored. Prior research has examined a limited set of mechanisms—such as access to finance and corporate bailouts—through which political connections generate rents for firms. Furthermore, existing studies suggest that political connections offer micro-level and episodic advantages, including assistance in acquiring licenses, permits, land, and infrastructure for new projects, as well as support in meeting compliance requirements for ongoing projects. Utilizing a unique dataset of projects undertaken by Indian firms, we empirically examine these benefits by focusing on two key project-level outcomes—new project announcements and project costs. We find that politically connected firms make significantly more new project announcements and incur lower project costs. We also find that state-level political connections are more beneficial than national-level connections in enabling these advantages.
Copyright Date
January 2017
Publication Date
1-1-2017
DOI
10.5465/AMBPP.2017.11583abstract
Keywords
Political science, Political connections
Conference
Annual Meeting of the Academy of Management, Atlanta, 4-8 August, 2017, USA
