Influence by Intimidation: Business Lobbying in the Regulatory Process

Abstract

Abstract Interest group influence in the policy process is often theorized to occur through a mechanism of exchange, persuasion, or subsidy. Here, we explore how business groups may also exert influence by intimidating policymakers—a form of persuasion, but one based on the provision not of policy information but of political information. We develop a theory in which a business firm lobbies a regulator to communicate political information about its capacity to commit to future influence-seeking activities that would sanction the regulator. The regulator assesses the credibility of this message by evaluating the firm’s commitment to lobbying. Guided by our theory, we present empirical evidence consistent with expectations that intimidation can shape regulatory outcomes to the advantage of certain firms, both through a chilling effect, by which lobbying derails nascent regulatory plans, as well as a retreating effect, by which opposition to published proposals leads to their withdrawal (JEL D72, D73, D78).