Campaign Contributions and New Technology Investment in the Broadband Industry

Abstract: We study how nonmarket actions taken by firms to shape the regulatory environment may impact their strategic market behavior. Studies have shown that corporate political activities (CPAs) can affect policy outcomes and firm value, but their influence on market actions remains underexplored. We propose that firm donations to politicians are associated with reduced investment in new technology infrastructure resources. We also argue that the size of the local market mitigates this effect while the positive local political environment intensifies the negative relationship. Our findings elucidate how firms implement their integrated strategies with both market and nonmarket actions and the important role that the nested nature of the larger political environment and local-level heterogeneity plays in shaping those strategies.