Embedded Files
Working Papers
Persuading Regulators to Punish Rivals - with Gianluigi Giustiziero and Simon Weschle
Abstract: We propose a new use for corporate political activities (CPA): using it to harm rivals. By focusing on CPA during regulatory enforcement, we argue CPA allows firms to credibly "snitch" on their rivals by providing information about their potential violations to the regulator. Building on political marketplace theory, we develop and test a theoretical model of CPA in regulatory enforcement. We show that in equilibrium, this only happens when violations are likely to cause significant harm to the population. In addition, we derive several boundary conditions underpinning our proposed mechanism. We find support for our theory in panel data on enforcement actions by the U.S. Environmental Protection Agency for more than 8,000 facilities over 12 years.
Mixing Motives: Political Donations by Corporate Executives - with Daniel Blake
Abstract: What motivates corporate executives to make political donations? Scholars interested in political ideology generally assign expressive motivations to executive donations while CPA scholars view executives as largely strategic donors. This study reconciles these two contrasting perspectives by reconceptualizing executives as mixed motive donors who allocate their donations both strategically and expressively. To support this position, we construct the most comprehensive dataset to date on executive donations from 1980 to 2024 and develop a measure of mixed motive donations that reflects both expressive and strategic giving. Using non-executive donors as a counterfactual baseline of expressive donors, we provide evidence that bipartisan donations and donations to politically influential members of Congress are examples of strategic giving. We find that executives devote a larger share of their donations to strategic giving, driven by their role as executives. This supports the argument, rooted in resource dependence theory, that executives face professional incentives to donate strategically. However, we also find evidence that the majority of executives’ donations are expressive, and that strategic giving varies across individuals and time. We find that variance in mixed motive giving can be explained partly by executives' compensation elasticity, firm size, political risk exposure and whether or not an executive is the CEO of their company. Overall, our analysis reveals that scholars should refrain from making uniform assumptions about executives’ motivations to donate, and view them as a varied group of mixed motive donors.
The Impact of Drug Shortages on Illegal Pharmacies’ Sales to U.S. Customers - with Luis Diestre
Abstract: We examine whether drug shortages in legal pharmacies push consumers towards illegal pharmacies. Using a novel methodology to measure U.S. consumers’ purchases from illegal pharmacies we find drug shortages have a substantive impact on illegal drug sales. Using a matched sample and difference-in-difference analysis for causal identification, we estimate illegal pharmacies’ sales of drugs experiencing a shortage increase by 31.5% during the shortage. We also find that illegal pharmacies’ sales of concomitant drugs—i.e., other drugs consumers typically take with the drugs experiencing a shortage—increase by 27.7% during the shortage. Further, our results show the effect of drug shortages is long-lasting. We estimate that illegal sales of the drug under shortage, as well as of concomitant drugs, remain 28.2% and 21.1% higher, respectively, six months after the shortage has been resolved. Given that drugs from illegal pharmacies pose serious safety risks, our findings uncover a hidden public health threat of drug shortages.
Effect of Redistricting on Governmental Contracts - with Joaquin Artes
Abstract: Redistricting not only changes the electoral landscape for voters, it also fundamentally alters the political landscape for firms. By adding, or subtracting, economic activity from a firm's district, this alters the nonmarket power, i.e. how hard a firm needs to work to gain the attention and services of their representative. Further, some firms are placed into districts that are drawn to eliminate incumbents in order to maximize the political representation of the party in charge of the state. This exogenously alters the political capabilities of the firm's representative in government. We show that both of these changes affects a firm's ability to secure governmental contracts. When a firm's nonmarket power increases, the firm is able to secure more contracts and more valuable contracts. Further, when firms are assigned to a freshman congressperson, they lose access to their representatives connections and are less likely to receive contracts.
Publications
My kind of people: Political polarization, ideology, and firm location - with Daniel Blake, Strategic Management Journal, 2024
Abstract: With increased political polarization, Americans are displaying more animus across, and affinity within, ideological identity groups. We argue this dynamic incentivizes firms to minimize ideological misalignments across their workforce by locating new establishments in areas that are ideologically proximate to their current operations. We further argue that the desire to minimize ideological distance to new establishments is stronger in knowledge-intensive industries and young organizations. We find support for these arguments through the analysis of over 220,000 new establishment openings from 2009 to 2014. Critically, we find the effect of ideological distance on location is stronger when societal polarization is high. Our theory, and findings, contribute to several literatures and advance our understanding of the impact of polarization on strategy.
Can firms avoid tough patent examiners through examiner-shopping? Strategic timing of citations in USPTO patent applications - with Luis Diestre, Strategic Management Journal, 2022
Abstract: We claim that, because patent citations influence examiner selection, firms disclose citations strategically to influence which examiner is assigned to their application (“examiner-shopping”). Specifically, firms are more likely to cite patents reviewed by “lenient” examiners in their original information disclosure statement (IDS) (sent before the examiner has been selected), and delay citations to patents reviewed by “tough” examiners to subsequent IDS (sent once the examiner has been selected). We propose this strategy will be implemented by those firms who benefit the most (firms that face patent thickets and are developing high strategic-stakes technologies) but only when the costs are low (when firms face a low probability of patent litigation). We find support to our theory in a sample of 9,763 United States patent and trademark office (USPTO) patent applications during 2000 to 2006.
The Friday Effect: Firm Lobbying, the Timing of Drug Safety Alerts, and Drug Side-Effects - with Luis Diestre and Juan Santaló, Management Science, 2020
Abstract: Safety alerts are announcements made by health regulators warning patients and doctors about new drug-related side-effects. However, not all safety alerts are equally effective. We provide evidence that the day of the week on which the safety alerts are announced explains differences in safety alert impact. Specifically, we show that safety alerts announced on Fridays are less broadly diffused -- they are shared 34% less on social media, mentioned in 23-66% fewer news articles, and 12-51% less likely to receive any news coverage at all. As a consequence of this, we propose Friday alerts are less effective in reducing drug-related side-effects. We find that moving a Friday alert to any other weekday would reduce all drug-related side-effects by 9-12%, serious drug-related complications by 6-15%, and drug-related deaths by 22-36%. This problem is particularly important since Friday was the most frequent weekday for safety alert announcements from 1999 to 2016. We show this greater prevalence of Friday alerts might not be random: firms who lobbied the FDA in the past are 49-56% more likely to have safety alerts announced on Fridays.
Pushing for Speed or Scope? Pharmaceutical Lobbying and FDA Drug Review - with Luis Diestre, Strategic Management Journal, 2019
Abstract: We argue firms implementing political activities face a fundamental trade-off between the content and the speed of public officials’ decisions. We show evidence of this trade-off looking at FDA drug approvals: lobbying for broader drugs leads to longer revisions, whereas lobbying to speed up the review process leads to narrower drugs. How do firms respond to this trade-off? We argue firms’ lobbying strategies depend upon the level of IP protection behind their drugs. We predict that firms with high levels of IP protection will lobby for drug scope, whereas firms with low levels of IP protection will lobby for revision speed. We find support for our theory in a sample of 540 new drug applications to the FDA from 1998 to 2015.
Ideology & Combat Motivation: Propaganda & German Soldier's Performance in World War II - with Charles Miller, World Politics, 2019
Supplementary Appendix
Abstract: What explains variation in soldiers’ willingness to fight? Scholars claim that monitor- ing, material rewards, and punishment of soldiers alone are insufficient explanations. Yet competing ideological accounts of motivation are problematic since ideas are difficult to operationalize and measure. To solve this, we combine extensive information on German soldiers combat performance from World War Two with conditionally exogenous exposure to Nazi radio propaganda. We find evidence that soldiers with higher exposure to propaganda are more likely to be decorated for valor even after controlling for socio-economic factors, Nazi membership, home district characteristics, and proxies for combat exposure.
The Origin of Wealth Matters: Merit, Fairness, and Equality in the Ultimatum Game - with William English, Journal of Economic Behavior and Organization, 2019
Abstract: How are fairness norms determined? In redistributive contexts, we argue fairness norms depend upon the origin of wealth. To test our theory we run the Ultimatum Game with three treatments: earned income, lottery income, and standard. When subject earn money their modal response ceases to be a 50/50 split. Rather their response anchors around comparative earnings, and is statistically different from the other two treatments. Furthermore, there is heterogeneity in participants' offers. Strikingly, roughly half of lower earners take less than 50% of the pot on average, even though a 50/50 split would almost assuredly be accepted.
The Specialization Curse: Economic Specialization and its Effect on Public Goods Provision - with Nimah Mazaheri, Business and Politics, 2019
Supplementary Appendix
Abstract: This paper examines the relationship between economic specialization and government expenditures. We hypothesize that firms and citizens in economically specialized regions pressure politicians to invest in core economic sectors in lieu of spending on public goods that benefit the broader economy, such as education. We test our hypothesis by looking at the US and India. We demonstrate a negative relationship between economically specialized US states and education spending, and a positive relationship between economically specialized US states and firm subsidies. Next, we examine the effect of an exogenous change in economic specialization by comparing Indian states created from federal bifurcation. We show how the creation of two highly specialized states (Bihar and Jharkhand) from a diversified state (Undivided Bihar) produced a decline in education spending but an increase in subsidies for core sectors. Our findings carry implications for the research on economic development, geography, federalism, and natural resource dependence.
Revisiting the Democracy-Private Investment Nexus: Does Inequality Matter? - with Kemal Kivanc Akoz, Jeffery Jensen, & Christina Zenker, Journal of Comparative Economics, 2018
Abstract: Contrary to the predictions of a large theoretical literature, recent cross-country evidence suggests autocracies can generate statistically indistinguishable levels of private investment compared to democracies. We argue that the previous exclusion of inequality explains part of this puzzle. We model current investment as a function of investors' beliefs about future tax rates, which are conditioned by the constraints on the Executive in setting tax rates and expropriating tax revenues. In democracies, where tax rates reflect the preferences of the median voter, investment declines with rising inequality. In autocracies, investor beliefs about future tax rates reflect the relative power of Elites compared to the Executive. As inequality rises, the increased resources available to Elites constrains the Executive's ability to expropriate more tax revenues. The heterogeneous determinants of investor beliefs can explain the observed pattern of investment across regime types. We first test our predictions at the macro-level with cross-country macroeconomic data. We then test the behavioral underpinnings of our model with a novel laboratory experiment showing how inequality affects individual-level investment behavior dependent upon regime type. Results from both types of analyses show that when inequality is taken into account autocracies can generate similar levels of investment to democracies.
It's Only Money: Do Voters Treat Human and Financial Sunk Costs the Same? - with Charles Miller, Journal of Peace Research, 2016. Nils Petter Gleditsch JPR Article of the Year Award
Abstract: The sunk costs fallacy is an important concept in the academic and policy worlds. It has helped explain consequential national security decisions such as the escalation in Vietnam and the surges in Iraq and Afghanistan. While previous analysis of sunk costs in international relations has made no distinction between financial and human sunk costs, there is evidence in psychology that people treat human lives and financial costs differently. The consensus in the casualty sensitivity literature is that human sunk costs should lower support for a conflict, but there is as yet no evidence on whether financial costs operate in the same way. Using the Environmental Protection Agency’s value of a statistical life to equalize human and financial costs, we create survey experiments through Mechanical Turk and GfK/Knowledge Networks about a hypothetical US military intervention to test if financial and human costs have the same effects on public opinion. We find that public reaction to sunk costs is contingent on the type of costs incurred. Consistent with the growing ‘sunk costs skeptic’ literature we find no evidence that any sunk costs induce greater commitment to a mission. Where the US contribution to the conflict is purely financial, sunk costs induce a desire to cut losses. When intervention involves US lives, sunk costs make no difference to the level of support. Finally, contrary to the implicit assumptions of past policymakers, ex ante levels of public support for sending troops and sending money are indistinguishable. These findings hold true both in situations involving high Iraq War level sunk costs and low Somalia-style costs.
Lobbying and the Collective Action Problem: Comparative Evidence from Enterprise Surveys - with Jan Pierskalla & Simon Weschle, Business and Politics, 2014
Abstract: Firm lobbying is traditionally thought of as a non-excludable good subject to collective action problems most easily solved by concentrated industries. However, there is very little empirical support for this, leading to increased focus on the private benefits of lobbying. We address a major shortcoming of the literature: it's near-exclusive usage of data from the United States. Using firm-level from up to 74 countries and Extreme Bounds Analysis to account for model uncertainty, we find no support that industry concentration is a predictor of lobbying activity, no matter whether we estimate pooled hierarchical or country-specific models. Employing Bayesian variable selection techniques, we instead show that firm-level variables such as size or exporter status are robustly associated with the propensity to lobby. This leads support to the notion that private returns to lobbying outweigh collective benefits in a comparative setting.
The Behavioral Foundations of Social Politics - with Pablo Beramendi and Erik Wibbels - Comparative Political Studies, 2013
Abstract: Often the literature on the welfare state is divisive. The Meltzer-Richards model claims that individuals will wish to redistribute based solely on relative income motivations. Models using risk hedging suggests individuals will respond to their labor market volatility. However in the real world, social spending is a combination of risk hedging and redistribution. How do voters parse out these different signals while voting for social policy? We investigate this using a laboratory experiment and survey data across the US.
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