Is Bigger Better? Firm Size and Governmental Influence

Jeffrey T. Macher (Georgetown University)
John W. Mayo (Georgetown University)

Abstract: A commonly held assumption is that large firms are more influential in shaping governmental policies than their smaller counterparts. The ability to rigorously examine this relation is hampered by inabilities to secure direct measures of firms’ political influence. We overcome this impediment by offering a more systematic analysis of the firm size-governmental influence relationship using a novel database that directly measures firms’ perceived influence over governmental decision-making entities. The paper develops and tests a conceptual model that captures the firm size-governmental influence relationship, along with other direct and moderating influences from country-level and industry-level determinants. In some circumstances, variations in country-level institutions or industry-level structural variations profoundly affect the standard firm size-governmental influence relationship. Nonmarket strategy implications that flow from this refined understanding are discussed.

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