Does Corporate Political Activity Make Firms Less Risk Taking?

Menghang Dong

Advances in Management and Applied Economics, 2017, vol. 7, issue 6, 1

Abstract: Institutional theorists tend to view firm’s corporate political activity (CPA) efforts as the pursuit of legitimacy which makes it more embedded in the institutional structure and subject to less uncertainty. If, as such asserts, firm behavior is shaped by taken-for-granted institutional prescriptions, how firms envision and enact risk-taking activities to the contexts in which they are embedded? This concept article aims to integrate legitimacy based view and behavioral agency model for a more comprehensive framework on risk-taking decisions of CPA-active firms. That is, both the ability as well as motivation are important to firms’ risk taking decision. The article contributes to the CPA literature and strategy research. It is not only bridging non-market strategy with market-favored outcomes, but also integrating institutional logic and the behavioral perspective for a more complete and predictive view of firms’ risk taking behavior than either theory alone. JEL classification numbers: C9, D4, D8Keywords: Corporate political activity, legitimacy, key decision maker, risk taking.

Date: 2017
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