Disadvantages Of Corporate Political Strategy

In a world where businesses and legislative authorities become increasingly intertwined, it is more important than ever for firms to exert influence on the decision makers in a country using corporate political strategies. These strategies may have a considerable impact on firm performance through the creation of competitive advantages. However, there is no one rigid corporate political strategy that can be employed for every situation, but rather a set of different strategies to attain different goals, which in turn are influenced by internal and external factors. This paper will therefore discuss, how firms can leverage their dynamic capabilities to find a corporate political strategy in order to maintain or increase value. Furthermore, channels

Firstly, defensive strategies are used by firms that want to interfere with the process of changing legislation to sustain value. Influence is taken by these firms, but rather to increase entry barriers for competition rather than to change legislation according to their needs (Oliver and Holzinger, 2008, p. 509). The competitive advantage is constant when employing this strategy. A proactive strategy is the most influential strategy. Here, firms actively shape legislation to fit their needs and to increase or create value. Firms may cooperate with governments or form alliances with other firms to exert pressure on the legislative powers (Oliver and Holzinger, p. 511). Hillman and Hitt (1999, p. 827), carrying this argument further, argue that only if firms become active in trying to shape government regulation can they profit from potential benefits of political behaviour. Therefore, they develop a taxonomy of three strategies, assuming that they have proactive underlying behaviour: information strategy, financial incentive strategy and constituency-building strategy (Hillman and Hitt, p. 835). The information strategy “targets political decision makers by providing information”, the financial incentive strategy “targets political decision makers by providing financial incentives” and the constituency-building strategy “targets political decision makers indirectly through constituent support” (Hillman and Hitt, p. 835). These strategies are based on decision tree model relating first to a transactional versus relational approach and then an individual or collective approach, similar to the interest groups outlined by Hague and Harrop (1999, p.