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Article
Publication date: 6 September 2019

Ekin Alakent, Mine Ozer and M. Sinan Goktan

The purpose of this paper is to explore the effect of venture capital (VC) funding as a form of ownership on lobbying strategies of venture-backed companies.

Abstract

Purpose

The purpose of this paper is to explore the effect of venture capital (VC) funding as a form of ownership on lobbying strategies of venture-backed companies.

Design/methodology/approach

The sample consists of venture-backed IPO companies between 1999 and 2014. The authors collected IPO data from the Thompson Securities Data Company (SDC) database. The authors collected VC data from SDC VentureXpert database and lobbying data from the Center for Responsive Politics database (opensecrets.org).

Findings

Consistent with the hypotheses, the authors find that VC-backed companies spend less on lobbying compared to non-VC-backed counterparts. However, this relationship is moderated by companies’ R&D intensity. R&D intensive VC-backed companies choose to spend more on lobbying.

Research limitations/implications

The research indicates that although VC backing has a negative impact on lobbying efforts, R&D intensity creates an incentive for VC-backed companies to spend more on lobbying in order to shape public policy to their benefit. The study consists of VC-backed companies that are public. The authors believe that future research can explore political strategies of VC-backed companies during their pre-IPO stage.

Social implications

The authors believe that political strategies are powerful yet underutilized resources that VC-backed companies can rely on to shift industries and invest in innovative products that challenge norms and fight the status quo. Lobbying and other forms of political involvement can help them shape public policy.

Originality/value

To the best of the authors’ knowledge, the study makes a unique contribution to the literature by exploring the political strategies of VC-backed companies.

Details

Journal of Entrepreneurship and Public Policy, vol. 8 no. 2
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 11 November 2014

Ekin Alakent and Mine Ozer

Organizational legitimacy is greatly influenced by firm corporate social responsibility (CSR) records. An organization with a poor CSR record can either try to improve its…

Abstract

Purpose

Organizational legitimacy is greatly influenced by firm corporate social responsibility (CSR) records. An organization with a poor CSR record can either try to improve its practices or attempt to manipulate institutional norms and belief systems in order to convince the society that its practices are acceptable. The authors argue that firms’ corporate political strategies (CPS) – attempts by firms to influence public policy outcomes in a favorable way – can be very effective in shaping legitimacy norms and offsetting negative public image. The purpose of this paper is to draw on institutional theory and propose that firms with negative CSR records consider investing in political strategies necessary in order to construct new legitimate standards in line with their strategies.

Design/methodology/approach

The authors test the hypotheses on 348 manufacturing firms using data from “The Center for Responsive Politics.” MSCI (formerly known as KLD) and COMPUSTAT. Research methodology used to test hypotheses is hierarchical ordinary least square regression analysis.

Findings

The authors find that firms with high CSR concerns invest more in CPSs. In addition, the results indicate that organizational visibility and organizational slack positively moderate this relationship. In other words, visible firms and firms with high organizational slack invest more in CPSs if they are facing CSR concerns compared to firms that are less visible and with less organizational slack.

Research limitations/implications

In this paper, the authors focus on the corporate governance dimension of CSR. Although focussing on the negative corporate governance practices gives us an opportunity to have a more focused approach, there are other important aspects of CSR such as environmental practices, employment issues, and accounting practices that are not addressed in this study.

Practical implications

This paper can serve as a testament to the value of investing in political strategies to the practitioners. The results indicate that firms can manage their image and reputation through political spending and this is especially true for firms that are more visible and have more organizational slack.

Originality/value

Much of the previous literature explores the relationship between market factors such as financial status of the firm and political strategies. This paper contributes to the literature by showing that other non-market forces such as poor social standing can also motivate companies to invest in political strategies.

Details

Journal of Strategy and Management, vol. 7 no. 4
Type: Research Article
ISSN: 1755-425X

Keywords

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