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

Min-Seok Pang (), Russell J. Funk () and Daniel Hirschman ()
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Min-Seok Pang: Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122
Russell J. Funk: Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455
Daniel Hirschman: Department of Sociology, Cornell University, Ithaca, New York 14853

Organization Science, 2024, vol. 35, issue 4, 1251-1270

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.

Keywords: U.S. airline industry; Congress; nonmarket strategies; pork and perk strategies; corporate political activity (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:35:y:2024:i:4:p:1251-1270

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