Nº 20-60: Political Activism and Market Power

Using novel data on firms’ government relations staff, and two distinct empirical settings, we show that political activism enables firms to grow their market power. The documented increases in profit margins and market share persist for up to two years, and are concentrated among large politically active firms. We also utilize firms’ mandatory lobbying disclosures to identify a broad set of legislative actions lobbied for by sample firms, and analyze their strategic actions around those events. Taken together, our results show that politically active firms gain a competitive advantage through strategically timed investments when policy uncertainty is high.