Exploring the actions of Government Affairs Managers during economic and financial crises—an...

Journal of Public Affairs (2012)Published online in Wiley Online Library(www.wileyonlinelibrary.com) DOI: 10.1002/pa.1443

■ Academic Paper

Exploring the actions of GovernmentAffairs Managers during economic andfinancial crises—an exploratory studyin the European Union

Andrew Barron*

Toulouse Business School, University of Toulouse, Toulouse, France

*CorToulE-ma

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This paper is a response to the paucity of theoretical and empirical research into the political actions undertaken byorganisations to influence policymakers’ responses to economic and financial crises. By using original, primary datagathered from semi-structured interviews conducted with Brussels-based Government Affairs Managers of multi-national enterprises, it reports the results of inductive, exploratory research into corporate political activity duringthe 2007–2011 financial crisis. Results suggest that not all firms are in favour of increased regulatory interventionduring times of economic upheaval. They also imply that, during recessions, firms are more likely to seek long-termas opposed to short-term relationships with policymakers, they also have a greater propensity to engage in collectivepolitical action than individual political action and they use information strategies more frequently than constituency-building and financial-incentive strategies. These results are subsequently used as the basis for a conceptual frame-work that draws on numerous theoretical traditions to capture the antecedents of firms’ political behaviours duringeconomic crises. Given the absence of theoretical and empirical work that actively engages with this issue, theresearch makes important contributions to the existing literature on corporate political activity. It also has practicalimplications for corporate political strategists and policymakers. Copyright © 2012 John Wiley & Sons, Ltd.

Keywords: corporate political action, economic crisis, European Union

INTRODUCTION

In the late 2000s, the global economy was gripped byone of the most severe economic downturns since theGreat Depression of the 1930s (Riaz, 2009; Wong,2009). Beginning in 2007 with the collapse of pro-minent financial institutions in the US such as MerrillLynch and Lehman Brothers, the downturn quicklyspread around the world to affect other countriesand sectors of activity. In an effort to head off reduc-tions in consumer wealth estimated in the trillionsof US dollars (OECD, 2010) and restore confidencein a troubled global financial system, governmentsacross the globe ushered in a slewof policy initiatives.Some of the measures included in these initiatives—such as the corporate bail-out programmes and the

respondence to: Andrew Barron, University of Toulouse,ouse Business School, Toulouse, France.il: [email protected]

yright © 2012 John Wiley & Sons, Ltd.

national stimulus plans announced by nationalgovernments—were reactionary and short term incharacter. Others—including the common frameworkagreement announced by European Union (EU)leaders in December 2009—pointed to a moreconcerted and coordinated effort to bring aboutlonger-term, structural changes to the regulation andsupervision of financial markets.Strategic management thinking has historically

encouraged organisations to gather and analyseintelligence on such political developments aspart of their environmental scanning activities.Indeed, the commonly used frameworks for PEST(political, economic, social and technological), SWOT(strengths, weaknesses, opportunities and threats)and STEER (socio-cultural, technological, economic,ecological and regulatory factors) analyses allencourage firms to monitor how and to what extentthey are affected by political factors. The need forpolitical monitoring seemed all the more important

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in the late 2000s when the increased willingness ofpolicymakers to intervene in the economy andintroduce measures to ease the effects of the globalfinancial crisis had a clear consequence on firms.

Crucially, this increased regulatory interventionimplied that the future development—and evensurvival—of many firms operating in differentsectors and in different countries appeared to beincreasingly dependent on the outcomes of decisionstaken by policymakers and elected officials.However, as argued by Fernandez and Usero (2009),the financial crisis required firms not only to monitorpassively those political developments but also toengage actively and more frequently with represen-tatives of governments and public institutions. Inother words, corporate political activity (CPA),defined as ‘any deliberate action taken by firms toinfluence governmental policy or process’ (Getz,1997: 32), appeared to be emerging as an increasinglycentral component of many firms’ overall businessstrategies. Against this background, the aim ofthis research was to explore the perceptions ofGovernment Affairs Managers (GAMs) regardinghow the financial and economic crisis affected theircorporate political actions and develop from theseperceptions a theoretical framework useful forexplaining the political objectives pursued by firmsduring crises and the specific strategies that theydeploy to achieve those objectives.

Rather than providing a definitive framework,the objective of this paper was to provide initialinsights into firms’ political activities during thecrisis and use those insights as the basis for develop-ing more in-depth research capable of providingmore sophisticated and nuanced explanations.The modesty of these objectives notwithstanding,the research reported here nonetheless makes somenotable contributions. First, from an empiricalperspective, it elucidates business–governmentrelations in a policy domain previously overlookedby scholars interested in firms’ political actions.Prior empirical research has focused on firms’endeavours to influence for example competitionpolicy (e.g. Aubry, 2009), trade policy (e.g. Rehbeinand Schuler, 1999), taxation policy (e.g. Drope andHansen, 2008), industrial policy (e.g. McKay, 1983)and environmental policy (e.g. Kolk and Pinkse,2007). Surprisingly, however, reviews of the main-stream CPA literature (e.g. Getz, 1997, 2001 andHillman et al, 2004) suggest that CPA scholars havenot examined how firms manage their politicalactivities during economic and financial crises.

Second, from a theoretical perspective, the researchengages critically with existing scholarly explana-tions of CPA to ascertain which—if any—caneffectively account for firms’ political objectives andstrategies specifically during times of economic andfinancial uncertainty. In an attempt to reduceacademic ethnocentrism, the research specificallyexplores whether patterns of corporate political

Copyright © 2012 John Wiley & Sons, Ltd.

actions during recessions are most effectivelyexplained by a combination of theoretical standpointsrather than one single scholarly tradition. Finally,from a practitioners’ perspective, the researchprovides GAMs with a strategic overview of politicaltactics deployed by other firms during recessions.This should help them to anticipate, respond to andact on the political actions pursued by rivals at a timewhen firms are competing for ever scarcer publicresources. The research is also useful for policy-makers in that it encourages them to anticipate andmake contingencies for possible sources of resistanceto their planned measures for tackling a financial oreconomic crisis.In making these contributions, the paper is

structured as follows. Through a brief overview ofprior theoretical and empirical literature in the fieldof CPA, the following section identifies the gap inexisting knowledge that the research aimed to fill.Next, it describes and explains a programme ofempirical fieldwork that was conducted to explorefirms’ political activities during the crisis. Thefieldwork results are subsequently presented anddiscussed in relation to the existing CPA literature.The conclusion sets out its implications foracademics, practitioners and policymakers. Thelimitations and future research avenues emergingfrom the research are also discussed.

PRIOR RESEARCH

Over 40 years ago, Epstein (1969) argued that firmsshould use governments as competitive tools forcreating business environments that favour theiractivities. In the intervening period, CPA hasbecome central to the overall business strategiesof firms operating in a number of industry sectors(e.g. Oberholzer-Gee et al., 2007). Consequently,scholars have expended considerable intellectualcapital in understanding what motivates firms tobecome politically active and what particularstrategies they pursue when entering the politicalarena (for reviews of the existing literature, seeGetz, 1997, 2001 and Hillman et al., 2004).Empirically, prior research has investigated firms’

political actions across a wealth of specific policyissues. To reference just a few recent examples fromthe large number of scholarly studies available,prior empirical research has focused on firms’endeavours to influence competition policy (e.g.Aubry, 2009), trade policy (e.g. Rehbein and Schuler,1999), taxation policy (e.g. Drope and Hansen,2008), industrial policy (e.g. McKay, 1983) andenvironmental policy (e.g. Kolk and Pinkse, 2007).In explaining why firms become politically activein response to such policy issues and how they seekto influence policy outcomes, these studies havedrawn on awealth of theoretical traditions, includinginterest group theory, resource-dependency theory,

J. Public Affairs (2012)DOI: 10.1002/pa

An exploratory study in the European Union

institutional theory, agency theory, the behaviouraltheory of the firm, collective action theory, transactioncost theory and public choice theory.

Notwithstanding the breadth of policy issuesalready addressed by the extant CPA literature,reviews of the mainstream CPA literature (e.g. Getz,1997, 2001 and Hillman et al., 2004) reveal a clearlyvisible paucity of research that engages with firms’political actions to influence policymakers’ responsesto economic and financial crises. Indeed, since theemergence of CPA literature in the 1960s, there havebeen several marked recessionary periods, triggered,for example, by the oil crises of the 1970s, the stockmarket crash of 1987, the Scandinavian bankingcrises of the early 1990s, the Asian and Russianfinancial crises of the late 1990s, and the ‘creditcrunch’ and associated financial crisis that began in2007. Surprisingly, however, no CPA scholars appearto have directly investigated how the political actionsof firms change in response to the considerableeconomic upheavals caused by these major economicevents. Thus, investigating firms’ political activitiesduring recessions is of clear practical value.

Moreover, interrogating firms’ political behavioursduring recessions is also interesting from a theoreticalperspective insofar as periods of economic uncer-tainty appear to have the potential to call intoquestion the theoretical assumptions upon whichmuch of the mainstream CPA literature is based.Accounts of CPA founded on the resource-basedview of the firm (e.g. Keim, 2001; McWilliams et al.,2002) provide a case in point. These works are builton the supposition that firms’ political actions aredependent on the development and deployment ofunique, inimitable and value political resources.Attention has typically focused on the firms’ financialresources. Accordingly, only firms endowed withsignificant financial resources will engage in politicalaction because they can afford to do so. However, thisparticular perspective overlooks the possibility, asdiscussed byHillman et al. (2004), that firms sufferingfrom low levels of financial resources may alsobecome politically active. After all, in times ofeconomic recession, they may consider a politicalsolution to be the only way to ride out the economicstorm brought about by a crisis.

Furthermore, resource-based view accounts ofcorporate political strategising also assume that firms’political resources are developed and deployed instatic political environments. However, as discussed,for example, by Oliver and Holzinger (2008), firmsare increasingly called upon to develop capabilitiesthat reflect the pace and complexity of contem-porary political environments. The need to considerthe dynamic as opposed to static nature of politicalenvironments seems particularly important duringperiods of economic and financial crises. Theshifting emphasis of political responses to thefinancial and economic crisis of 2007–2011 providesa salient example.


When the crisis first hit, regulators introducednational rescue and stimulus packages (e.g. theFinancial Stability Plan unveiled by the ObamaAdministration in February 2009) to ward off reces-sionary pressures and announced plans to regulateand supervise financial markets (e.g. the commonframework agreement proposed by the EU in2010) to prevent the crisis from repeating itself.However, amid fears that bailing out falteringindustries had raised government deficits to levelsthat could potentially lead to sovereign debtcrises, policymakers had, by 2010, changed tackand were seeking to rein in public spending byimplementing harsh austerity measures. As thependulum swung between, first, the need for moreand, subsequently, the need for less governmentintervention, there appeared to be a need for firmsto develop ‘dynamic political capabilities’ (Oliverand Holzinger, 2008) in response to their changingand complex political environments.The absence of empirical enquiries into corporate

political strategizing during periods of economiccrisis and uncertainty, coupled with the potentiallyquestionable theoretical assumptions upon whichmuch of the CPA literature rests, raises interestingresearch questions for practitioners and academicsalike. For example, what political objectives dofirms pursue during periods of recession? Whichstrategies do they employ in pursuit of thoseobjectives and why? And what do firms’ politicalactions during recessions reveal about existingtheoretical explanations of CPA?

METHODS

In direct response to the empirical and theoreticalconcerns levied against the existing literature, it wasdecided to explore firms’ corporate political activitiesduring a specific period of economic and financialinstability, chiefly the international financial crisis of2007–2010. Given the dearth of theoretical andempirical work in this particular area, an exploratoryresearch approach was chosen. In line with Straussand Corbin (1990), fieldwork was guided by aqualitative inductive research methodology thatsought to use lobbying practitioners’ professionalexperiences as the basis for understanding firms’political actions during the recessions. Specifically,the data underpinning the study were gatheredthrough a series of exploratory telephone interviewsconducted in May and June 2009 with the GAMsrepresenting the political interests of large, multi-national enterprises (MNEs) in the EU context.Potential informants were identified using the

European Public Affairs Directory, a “who’s who”of Brussels-based, in-house lobbyists representingtheir firms’ interests in the EU’s institutions. Thecriterion used for selecting informants was theirindustry membership. Given that the financial


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sector had been particularly, severely affected by theeconomic and financial crisis (Blundell-Wignallet al., 2008), the original objective of the fieldresearch was to interview GAMs representingfinancial institutions (banks, insurance companies,etc.). However, difficulties were experienced inconvincing the political representatives of suchinstitutions to contribute to the research. Notwith-standing the guarantees of confidentiality made toencourage participation in the research project,potential informants mailed us explaining that theywere unable to participate owing to busy workloadsand the sensitivity of the research topic. A possibleexplanation behind this reluctance to participate inthe research may be that, in the wake of the financialcrisis, banks and financial services organisationswere undergoing a considerable change in theirapproach to lobbying. Crucially, given the conse-quences of the crisis and the risk of bankruptcies,banks may have been increasingly devoting timeand resources to creating partnership solutionswith governments.

Given the reticence of banks to take part in theresearch, the decision was taken to focus on theconstruction and manufacturing sectors. After all,these two sectors had also been adversely affectedby the financial crisis (Blundell-Wignall et al.,2008). Of the 47 managers identified and contacted,13 agreed to participate in the research, includingsix GAMs representing construction firms andseven GAMs representing manufacturing firms.

The objective of each interview, which lastedapproximately 1 hour, was to (i) determine thepolitical objectives that firms pursued during therecession, (ii) identify the particular strategies theyused to achieve those objectives and (iii) haveinformants explain the reasons behind theirstrategic choices. The interview questions were inpart informed by prior research into corporatepolitical strategising. For example, in terms of theiroverall political objectives, GAMs were asked, inline with Van Schendelen (2005), to explainwhether they engaged in positive lobbying aimedat passing new regulations to protect/supporttheir business activities or in negative lobbyingaimed at warding off regulatory intrusion. To castlight on the particular strategies they used toachieve their political objectives, GAMs wereasked in accordance with the decision-tree-basedmodel of political action developed by Hillmanand Hitt (1999) to elaborate on (i) their generalapproach to political action, (ii) their level of partici-pation in the policymaking process and (iii) theirpreferred choice of political tactics during thefinancial crisis.

In terms of their general approach to politicalaction, informants were asked to indicate whetherthey tended to engage transactionally or relationallywith policymakers during the recession. Transac-tional engagement involves waiting for specific


public policy issues to develop before devising astrategy in response to those issues. Relationalengagement involves fostering enduring relation-ships with policymakers across numerous policyissues. Over time, these relationships will ensurethat firms have in place the necessary contacts andresources whenever policy issues arise. Regardingtheir level of participation in the policymakingprocess, the GAMs were asked specifically whether,during the recession, they tended to pursue politicalaction individually or collectively, for example,under the auspices of a business association.In terms of their political tactics, informantswere asked to explain the extent to which theydeployed information strategies, constituency-building strategies or financial-incentive strategiesto influence policy outcomes during the recession.Information strategies involve issuing positionpapers and technical briefs or making contri-butions to public consultations to communicatetheir policy preferences and concerns directlyto specific policymakers. Constituency-buildingstrategies involve designing wider-reaching publicrelations campaigns that generate grassrootssupport for their concerns amongst voters who, inturn, express their policy concerns and preferencesto political decision makers. Financial-incentivestrategies involve making financial contributionsto policymakers or political parties, or fundingelection campaigns.When inviting the informants to explain the

reasons behind their strategic choices, the interviewquestions were deliberately left open ended.Formulating questions in this manner encouragedinformants to answer on their own terms andin their own words. This approach reflectedthe qualitative, inductive spirit of the researchand the desire to develop theoretical explana-tions of corporate political strategising duringrecessions on the basis of practitioners’ lived experi-ences, rather than on pre-determined answersimposed by the researcher that could potentiallyinfluence the way in which informants responded.Informants were invited to review interviewtranscripts to ensure that their perceptions hadbeen faithfully captured.Focusing on the context of the EU provided a rich

environment for investigating the political actionsof firms. Indeed, the Commission and its institu-tions present firms with numerous choices in termsof corporate political strategising. As argued byGreenwood (2007), firms can represent theirinterests alone by establishing an EU liaison officein Brussels, or they can articulate their interestscollectively through European trade associations;they can pursue information strategies by submit-ting contributions to public consultations organisedby the Directorate Generals (DGs), or they can usethe services of public relations consultancies topursue constituency-building strategies.



RESULTS

Firms’ political objectives during the crisis

With respect to the political objectives pursued byfirms during the recession, informants claimed toengage in both positive and negative lobbying. Afurther analysis of the interview data revealedmarked differences in the answers provided byBritish informants on the one hand and continentalEuropean informants on the other. Specifically, theBritish informants were more inclined than theircontinental counterparts to undertake negativelobbying. As explained by the representative of aBritish engineering company, his raison d’être duringthe crisis was more so than ever to block plannedEuropean legislation and reduce the burden of costsimposed by new regulations. ‘The current purposeof my existence in Brussels’, explained anotherBritish informant, ‘is to influence policymakers sothat the European business environment becomesmore effective and efficient and so that externalcosts go down which in turn makes Europeanindustry more competitive on a global scale’. Thepolitical representatives of continental Europeanfirms, by contrast, appeared to pursue more positivelobbying objectives. For example, one French GAMbroached the potential dangers of obstructing thepassing of new regulations during the recession.Another French informant expressed her irritationand frustration with British GAMs who sheclaimed were automatically overstating the negativeimpacts of new legislation during the crisis. For hispart, the political representative of a Swedish engin-eering company explained that, ‘helping—ratherthan calling into question policymakers—is the keyto influence in Brussels at the moment’.

Relationships with policymakers during the crisis

In terms of the level of engagement with policy-makers during the crisis, only one interviewee spokeabout the need to enter into ad hoc, transactionalrelationships with decision makers on specific issuesduring the recession. This informant claimed thathis company was lacking political influence becauseit was relying on the historical relationships it hadforged with key contacts working in DGs that werenot directly working on the EU’s policy responsesto the crisis. Other firms, he argued, were moreinfluential than his during the crisis precisely becausetheywere entering into shorter-term,more superficialrelationships with policymakers operating in a widerrange of DGs.

This view, however, was not shared by themajority of other informants. Indeed, most stressedthe importance of entering into longer-term relation-ships with policymakers during the recession.Furthermore, when asked to explain why they


pursued such a relational approach, the informantsalluded to their increased dependency on policy andpolicymakers during the recession. For example, theGAM of a construction group stated that influencingpolicy outcomes during the recession required firstgetting to know decision makers before their supportwas required. As he explained, ‘if you need help frompolicymakers, then your first contact with themshouldn’t involve asking for something becauseyou’ll stand little chance of influencing them’. Thisperception was also shared by the representative ofan engineering company, who claimed to haveinvested considerable time and effort during therecession in establishing a long-term dialogue withpolitical decision makers. ‘I’ve been meeting policy-makers’, he emphasised, ‘not to ask them forsomething, but rather to get to know them andunderstand them and enable them to understandus’. Such longer-term relationships, he believed, hadfacilitated discussions with policymakers when hehad needed to raise issues about planned politicalresponses to the crisis and their impact on his firm.

Propensity to engage in individual or collectiveaction during the crisis

In terms of their level of participation in the policy-making process during the recession, the majority ofinformants expressed a preference for collective asopposed to individual political action. Indeed, onlyone of the informants emphasised the need to workalone in Brussels. Specifically, she criticised thevagueness of the policy positions issued by pan-European trade federations during the recession,explaining that ‘working alone, we can express ourpositions more clearly, more precisely and morespecifically’. Those informants claiming to engage incollective action during the crisis gave a number ofdifferent explanations for their strategic choice. Forexample, the political representative of one construc-tion group claimed that, during the crisis, ‘a commonposition articulated by several European firms carriesmore weight in Brussels than a single positiondefended by our organisation’. The representative ofanother construction firm stated that, especially dur-ing the economic crisis, working with competitorswas necessary for reasons of credibility.Notwithstanding these different reasons advanced

by informants to explain their recourse to collectiveaction, a constant, recurring theme found acrossall interviews conducted was the pressures offinancial budgets and their impact on firms’ interest-representation activities. That collective action wasnecessary during the crisis precisely for reasons offinancial resources was succinctly encapsulated bythe representative of an engineering firm. ‘Sincethe start of the crisis’, he explained, ‘we’ve beenincreasingly reliant on the manpower of ourEuropean trade association. In the current economic


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climate, we simply don’t have the resources torepresent ourselves effectively. We would need anadditional 10 people, but we don’t have the meansto hire so many new people’.

Political tactics and techniques deployed by firmsduring the crisis

When asked about the political tactics and techniquesthey were deploying during the crisis, none of theinformants admitted to using financial-incentivestrategies. Only one made a specific reference toconstituency-building strategies. Specifically, therepresentative of one firm commented that ‘we aredealing with highly technical and abstract issues soit’s difficult to run PR campaigns to mobilise thegeneral public in support of our concerns’. Instead,all the informants shared a common perception thatinformation strategies were the most effective meansof gaining access to and influencing policymakers.Moreover, when asked to explain their choice oftactics, informants invariably stated that informa-tion strategies responded directly to policymakers’knowledge gaps. For example, the representative ofone firm explained that ‘policymakers have clearideas of the general political direction they want tofollow, but they are lacking the in-depth, detailedknowledge of the specialised fields within theirportfolios, and this is making them more dependenton the information provided by us, the firms’. Therepresentative of another company explained that,especially given the breadth of the economic down-turn, Commission officials needed the informationand knowledge provided by firms because ‘one daythey are dealing with the effects of the crisis on thefinancial sector, the next day on the car industry andthe day after on the retail sector’. As she continued,‘they are really in the nitty-gritty of things and relyon our information because they often have no clueabout the issues they have to write reports about’.

Summary of results

The key information gleaned from the interviews ispresented in Table 1.

Table 1 Key findin

Component of political activity

Political objectives pursued Positive lobblobbying am

Relationships with policymakers Long-term rParticipation in policymaking Collective poTactics and techniques deployed Information

building stra


DISCUSSION

The objective of this research was to explore howfirms behaved politically during the longest anddeepest recession since the Great Depression of the1930s and from the insights gleaned, elaborate atheoretical framework useful for understanding thepolitical objectives and actions of large firms duringeconomic and financial crises. With the interviewsconducted, some companies engaged in positivelobbying aimed at passing new regulatory measures,whereas others engaged in negative lobbying aimedat blocking such measures. Indeed, distinctive cross-national differences regarding the need for govern-ment intervention were observed. The interviewsalso revealed that—in times of recession—firms aremore likely to (i) seek long-term as opposed toshort-term relationships with policymakers, (ii) havea greater propensity to engage in collective politicalaction than individual political action and (iii) favourinformation strategies over constituency-buildingand financial-incentive strategies. The theoreticalframework constructed from the research findings ispresented in schematic form in Figure 1.As discussed in the following text, the framework

suggests that none of the theoretical traditionscommonly applied by CPA scholars can singlehand-edly explain firms’ political objectives and strategiesduring times of economic and financial uncertainty.Instead, it proposes that corporate political strate-gising during recessions can be more effectivelyexplained using a combination of insights drawnfrom multiple theoretical perspectives.

Firms’ political objectives during the crisis

In terms of the political objectives pursued by firms,it was found that not all the GAMs interviewedwere engaged in positive lobbying aimed at intro-ducing new legislation that would protect themfrom the effects of the economic and financial crisis.Instead, some interviewees revealed that, during therecession, they were pursuing negative lobbyingand seeking to ward off the threats posed byincreased regulation. A closer analysis of the datafound there to be marked cross-country variationsin the importance attached by firms to legislation

gs of interviews

Findings

ying amongst continental European informants; negativeongst British informantselationships more important than short-term relationshipslitical action more prominent than individual political actionstrategies more frequently used than constituency-tegies


Figure 1 A model of corporate political activity during economic and financial crises


as a solution for overcoming the crisis. Crucially,continental European companies appeared morelikely than their Anglo-Saxon counterparts tofavour new legislation.

These cross-national variations in attitudestowards legislation are interesting because theyappear to call into question accounts of CPA basedon particular theoretical traditions. For example,scholars drawing inspiration from resource-dependency theory (e.g. Pfeffer and Salancik, 1978;Hart, 2001; Schuler et al., 2002) have argued thatfirms’ political objectives are largely informed bytheir dependency on decisions taken by policy-makers: the more dependent they are on policy-makers, the more likely they are to pursueproactive, positive lobbying objectives aimed atputting into place new legislative and regulatorymeasures in support of their business activities.Although the interviews were conducted at a timewhen the survival and well-being of firms appearedto be increasingly contingent on decisions taken bypolicy officials, none of the informants made specificreference to dependency on policymakers as themotivations behind their political objectives.

Instead, the cross-country differences thatemerged from the interviews appear to lendsupport to cross-cultural explanations of CPA.Indeed, scholars (e.g. Harrison and McKinnon,1999; Jeanquart-Barone and Peluchette, 1999; Perry,2002; Moussetis et al., 2005; Meuleman, 2010)have shown that economic actors socialised in risk-accepting cultures such as the UK are less likelythan their counterparts from risk-avoidingcultures to introduce regulations (at the organisa-tional level) and laws (at the societal level) asmechanisms for managing unpredictability andambiguity. Applying these insights to firms’political behaviours, it has been argued (e.g. Barron,2011) that GAMs from risk-avoiding cultureswill engage in CPA proactively to create new


regulations, whereas managers from risk-acceptingcultures will engage in CPA defensively to blockor temper planned regulations. The finding thatUK informants engaged in negative lobbying addsweight to this thesis.The differences in political objectives observed

between the Anglo-Saxon and continental Europeaninformants may be further explained by the UK’scontinuing cultural opposition to European integra-tion and the desire to maintain a specific economicand financial system. Indeed, before the financialcrisis hit, bankers and policymakers in the UK wereconsidered to be fervent supports of light-touchfinancial regulation (Hodson and Mabbett, 2009).During the crisis, creeping financial regulationfrom Brussels had the potential to undermine theinternational competitive situation of the City ofLondon, which since the late 1980s had been consid-ered a key engine for national growth (Pauly, 2009).Against this background, it makes sense that UKinformants, keen to see responsibility for financialregulation remaining in the hands of nation-states,would pursue negative lobbying objectives toprevent such responsibilities being transferred tothe EU and its institutions.The propensity of Anglo-Saxon firms to engage

in negative lobbying may be further explainedby a political environment that was becomingincreasingly hostile to the Anglo-Saxon model.Indeed, during the crisis, both policymakers (e.g.Olgu, 2011) and public opinion (e.g. Eurostat,2010) were increasingly questioning the allegedvirtues of the Anglo-Saxon model of relativelyunregulated capitalism and were holding theAnglo-Saxon model partially responsible for thecrisis. In such an environment, it is likely thatAnglo-Saxon firms engaged in negative lobbyingto ward off the attempts by European policymakersto be seen to be more actively regulating industriesin response to corporate failures.


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Relationships with policymakers during the crisis

Dependency on policymakers surfaced as a factoraffecting firms’ engagement with policymakers.Crucially, the GAMs interviewed stated that, duringthe recession, they were more likely to seek long-term rather than short-term relationships withpolicymakers. Moreover, they implied that thischoice of engagement was driven by a perceivedincrease in dependency on policymakers’ decisions.This particular finding challenges the existingresearch that draws on institutional theory (e.g.Hillman and Keim, 1995; Hillman, 2003) to suggestthat firms’ choice of general approach to CPAdepends on the characteristics of the politicalsystem within which they operate. It is also at oddswith accounts of CPA grounded in the behaviouraltheory of the firm (e.g. Hillman, 2003) implying thatfirms’ engagement with policymakers is contingenton whether they offer a highly diversified range ofproducts and services.

Rather, the finding adds weight to explanations ofCPA based on resource-dependency theory thatsuggest that whether firms decide to engagetransactionally or relationally with policymakers isdetermined by the degree to which they aredependent on policy. As argued, for example, byHillman and Hitt (1999), firms operating inrelatively unregulated environments, or firms thatperceive a low degree of dependency on govern-ment policy, are likely to be more inclined towardssporadic, transactional political action as and whenspecific policy issues arise. By contrast, those firmsoperating in more regulated environments, or firmsthat perceive a high degree of dependency ongovernment policy, are likely to engage in morelonger-term, relational action. Our findings buildon this existing research by suggesting that firmsdepend on policymakers not only because theyoperate in highly regulated industries or depend ongovernment protection in global trade negotiations(e.g. Hart, 2001; Schuler et al., 2002); our findingsspecifically suggest that, during times of economicuncertainty, firms seek long-term relationships withlegislators upon whose actions their long-termsurvival and well-being ultimately depend.

Propensity to engage in individual or collectiveaction during the crisis

The third finding arising from the interviews wasthat GAMs were more likely to engage in collectiverather than individual political action during thecrisis. When questioning informants on their moti-vations for collective action, they all made referenceto the financial expenses associated with individualpolitical action. This finding is in opposition to thosescholars who explain firms’ participation level in thepolicymaking process using resource-dependency


theory (e.g. Ozer and Lee, 2009) and assert that firmsengage in collective political action when they aremoderately dependent on policymakers. Furthermore,it calls into question research based on collective actiontheory (e.g. Masters and Keim, 1985) suggesting thatfirms are more likely to enter the political area ascollectives when they operate in concentrated indus-tries. Moreover, it contests transaction cost basedexplanations of firms’ decisions to engage in individ-ual or collective action (e.g. Blau and Harris, 1992;Kaufman et al., 1993; Shaffer, 1995) purporting thatfirms facing diffuse, industry-wide threats are likelyto externalise their lobbying activities such as throughbusiness associations. Rather, the finding lends sup-port to those scholars of CPA (e.g. Meznar and Nigh,1995; Schuler and Rehbein, 1997; Hillman and Hitt,1999; Schuler et al., 2002) who, drawing on the behav-ioural theory of the firm, have demonstrated thatfirmsare more likely to engage in collective political actionwhen they have few financial resources—or organisa-tional slack—at their disposal.This finding makes sense given that firms’ finan-

cial resources were likely to be particularly underpressure during the economic and financial crisisas banks tightened their credit conditions and asfalling consumer confidence reduced demand forfirms’ products and services. This was especiallyevident in the EU where the turning in the globalcredit cycle and the prolonged and severe turmoilon international financial markets have triggeredthe deepest and longest recession in Europesince the Second World War, with no significantimprovement in growth expected until the late2010 (European Commission, 2009; OECD, 2009).It also makes sense given that, faced with such

deteriorating economic conditions, firms operatingin European construction and engineering wereadversely affected financially by the crisis. Indeed,statistics compiled by the European ConstructionIndustry Federation illustrated that, as a direct resultof the economic crisis, the overall construction activ-ity in the EU stagnated in 2009 and contractedstrongly by �5.2% in 2009 (FIEC, 2009). Accordingto the European Automobile Manufacturers Associ-ation, vehicle production fell as a result of the crisisby 25% in 2009 compared with 2007 levels, withreduced employment levels, production shut-downsand strains on budgets being the inevitable conse-quences for manufacturers (European AutomobileManufacturers Association, 2009). Against such abackground, it is thus likely that firms have lackedthe organisational slack necessary for pursuingindividual political strategies.

Political tactics and techniques deployed by firmsduring the crisis

Finally, it was found that GAMs favoured the use ofinformation strategies over constituency-building



and financial-incentive strategies during the crisis.When asked to explain this strategic choice, infor-mants claimed that they used such tactics becausethey considered policymakers to be lacking thenecessary technical data to respond to the crisis.This finding goes against scholars who explainfirms’ use of political strategies by using resource-dependency theory to suggest that firms’ relianceon government resources encourages them topursue financial-incentive strategies. For example,Pfeffer and Salancik (1978) demonstrated that, asfirms become increasingly dependent on policy-makers, be it because they work as a governmentcontractor or because they operate in sectorssubject to considerable legislative scrutiny, theirfinancial contributions to policymakers increase.As discussed earlier, the informants did considerthemselves to be increasingly dependent on policy-makers during the crisis. However, with the inter-view data collected, this dependency did nottranslate into an increased inclination to makefinancial contributions to EU policymakers.

Instead, the finding that informants’ choices ofpolitical tactics were driven by a perception thatpolicymakers required technical informationduring the crisis adds credence to explanations offirms’ political activities based on social-exchangetheory (e.g. Mitnick, 1991) highlighting that thetransfer of resources for mutual benefit is a keyfeature of relationships between firms and policy-makers. Scholars have already discussed theimportance of possessing intangible resourcessuch as knowledge, information and expertise togain access to policymakers in the EU and itsinstitutions (e.g. Bouwen, 2002, 2004; Dahan, 2005).Our research builds on this prior work by highlight-ing the significance of informational resourcesduring economic crises.

Crucially, when considered alongside the secondfinding discussed earlier, the research reported,here, suggests that, during the recession, informantsconsidered that firms were not only dependent ongovernment resources for their survival but alsothat informants considered policymakers to bedependent on firms’ resources—most specificallyinformation resources—for their policymakingactivities. This appears plausible given that, duringthe crisis, policymakers in the EU and its institu-tions were likely to have increased informationalneeds. Specifically, it is probable that the broadimpact of the recession meant that policymakersrequired informational inputs from actors in thefield to ascertain how the downturn was affectingfirms in a wide range of economic sectors. EUpolicymakers may have lacked the necessaryexpertise on the inherent complexities of thefinancial services industry and were unable on theirown to understand how their proposed changesto existing financial regulation would have animpact on firms in the wider economy.


CONCLUSIONS

Despite the rich corpus of scholarly work addres-sing the objectives pursued by firms in the politicalarena and the strategies that they use to achievethose objectives, there is a clear paucity of literatureinvestigating the political behaviour of firms duringrecessions. In response to this gap in existingknowledge, interviews were conducted in Mayand June 2009 with the GAMs representing thepolitical interests of large, MNEs in the EU.Findings suggest that corporate political strategiz-

ing during recessions is best explained by severalrather than one single theoretical perspective. Firms’political objectives can be explained by cross-culturalinterpretations of CPA. In line with Barron (2011),firms’ decisions to engage in positive or negativelobbying can be explained by culturally groundedpreferences for rules and regulations. Duringrecessions, firms’ general approach to CPA can beaccounted for by research informed by resource-dependency theory (e.g. Hillman and Hitt, 1999;Hart, 2001; Schuler et al., 2002): firms are moreinclined during periods of economic uncertainty toseek long-term relationships with policymakersbecause their long-term survival depends on policyoutcomes. During recessions, firms’ participationlevels in policymaking processes can be explainedby the behavioural theory of the firm (e.g. Meznarand Nigh, 1995; Schuler and Rehbein, 1997; Hillmanand Hitt, 1999; Schuler et al., 2002), which arguesthat firms are more likely to engage in collectivepolitical action when they have few financialresources at their disposal. Finally, the political tacticsand techniques used by firms during recessions canbe explained by social-exchange theory (e.g. Mitnick,1991). Indeed, during recessions, firms are not onlydependent on government resources for theirsurvival; governments are also dependent on firms’resources—in this case information and expertise—when formulating political responses to recessions.Alongside making theoretical contributions to the

existing body of CPA literature, the research alsohas important implications for practitioners andpolicymakers. Taken together, the findings provideGAMs with an overview of the political strategiesthat others deploy in response to a financial andeconomic crisis. At a time when firms are competingfor ever scarcer public resources, such a strategicoverview can help managers to anticipate, respondto and act on the political actions pursued by rivalfirms. Moreover, the finding that attitudes towardsnew regulation in response to financial crises differacross countries has implications for policymakersinsofar as it enables them to anticipate and makecontingencies for possible sources of resistance totheir planned measures for tackling a crisis.These theoretical and practical implications

notwithstanding, the explanatory strength of themodel presented in Figure 1 should not be


A. Barron

overstated. For example, owing to timing issues andthe potentially sensitive nature of the researchquestions, a limited number of GAMs ultimatelyagreed to participate in the research. In addition,the research focuses exclusively on the EU. As muchas this context provides a fruitful environment forexploring firms’ political behaviour, the researchreported here does not consider the politicalbehaviours of firms in other political settings (e.g.the US) during the financial crisis. Moreover, theemphasis of political responses to the financial crisishas shifted since the interviews underpinning theresearch conducted in 2009. Amid fears that bailingout faltering industries has raised governmentdeficits to levels that could potentially lead to sover-eign debt crises, policymakers have changed politicaltack, reining in public spending and implementingharsh austerity measures. The research reported heredoes not consider firms’ responses to these morerecent policy developments.

In light of these limitations, the research findingsshould ideally be considered in terms of propositionswhose wider validity needs to be tested by moredetailed empirical work, conducted in other politicalsettings and involving a larger number of informants.It is nonetheless hoped that the findings provide aninsightful snapshot into the political activities oflarge firms on the European political stage during aperiod of economic and financial uncertainty whengovernment intervention was on the rise.

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