A Sociopolitical View of the “make And/or Buy” Decisions in Corporate Political Lobbying

Nan Jia (University of Southern California)

Abstract: This paper examines firms’ decisions of using internal functions (“make” or insourcing), contracting with external professionals (“buy” or outsourcing), or doing both (“make and buy” or plural sourcing) to carry out political lobbying. Two common theories to explain the sourcing of economic transactions based on economic efficiency—the transaction cost economics and the firm capabilities view—face innate limitations when applied in the context of corporate political lobbying. Overcoming this limitation requires going beyond the dyadic transactional relations between the firm and the external lobbyist, to consider how the “receiving” end of lobbying—the political audience (e.g., voters, politicians)—evaluates different forms of lobbying based on sociopolitical considerations, which is inherent in the context of political lobbying but may or may not be relevant to economic goods. I argue that these sociopolitical factors not only directly affect sourcing decisions, but constitute boundary conditions for the known relationships between transaction hazards and/or firm capabilities and sourcing decisions. Moreover, complementarities in plural sourcing helps to resolve the tension in certain cases when sociopolitical and economic efficiency considerations call for different forms of sourcing.