We Fly Congress: Market Actions as Corporate Political Activity in the U.S. Airline Industry

Abstract

The literature on corporate political activity (CPA) generally views nonmarket actions aimed at influencing political actors (e.g., lobbying or campaign contributions) as related but separate activities from market actions. This study demonstrates how firms’ core market actions (e.g., market entry or geographic expansion) can function as CPA. We theorize two mechanisms through which firms leverage market actions as CPA: “pork” (i.e., ones that primarily benefit a politician’s constituents) and “perk” (i.e., ones that directly benefit the politician). We document these mechanisms through an empirical analysis of data from the U.S. airline industry in 1990–2019. Specifically, we find that airlines increase the supply of flights from the airports in the home district of the chair of the Transportation Committee in the U.S. House of Representatives (pork). We also find that the airlines increase the supply of nonstop flights to Washington, DC. from the Chair’s district (perk). We use counterfactual estimation methods and exogenous turnovers in committee leadership to provide causal evidence. Moreover, the observed increase in flight supplies is negatively associated with formal policy changes in Congress, and with text mining techniques, we find that this effect is stronger for bills related to aviation safety and security. We contribute to the literature on CPA by demonstrating a blurred boundary between market and nonmarket actions, which helps explain firms’ competitive actions that cannot be explained by market considerations alone. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.17026 .