Social influence, competition and the act of lobbying

Abstract

Despite the observed frequency of firm lobbying, scholars attempting to explain this behavior have had little luck. Pushing away from theories that center on firm characteristics, this paper argues that firm lobbying can be best explained with a sociological model of competitive action. In particular, firms that perceive other firms to have influence on policy are more likely to lobby policy-makers. Since firms are both competitors in a free market and socially embedded actors, their belief in other firms’ influence on policy pushes them to engage in similar behavior in order to increase profit and survive. I test this argument with a combination of quantitative analysis of survey responses from 7247 firms in 40 countries from the World Bank Enterprise Survey and seven qualitative interviews with key firms in the Turkish Republic of Northern Cyprus. The results provide evidence for the hypothesis. This finding implies that scholars should not only take into account firm characteristics, but also explore the possible effects of how a firm's decision to lobby or not is influenced by its environment.