Essays on Corporate Political Actions Under Globalization
Feng, Yilang
2019
Abstract
This dissertation consists of three essays on firms' political actions under globalization. More specifically, it examines different aspects of firm lobbying on regulatory policies and trade policies. Chapter 1 summarizes each essay and discusses the common theme across all chapters of the dissertation. Chapter 2 asks: how does a firm's global production affect its political behaviors to shape its home country regulatory policies? This question lies at the intersection of globalization and money-in-politics, and it is becoming increasingly relevant today with nationalist discontent challenging the global order. I address this question with a theory of regulatory arbitrage: in response to unfavorable regulatory outcomes at home, it is easier for firms with overseas operations to offshore more of their domestic operations abroad, resulting in an outflow of capital and jobs from the home country. This locational flexibility across multiple jurisdictions serves as an advantageous bargaining position for internationalized US firms in the lobbying process. To test it, I construct a 2007-2016 offshoring panel to show that US firms with overseas operation in the same sector (i.e. shell companies are excluded) are substantially more active in lobbying on US domestic regulations (i.e. lobbying reports with international economic policy components are excluded). Chapter 3 asks: what factors determine corporate support for China's international trade initiatives? This paper argues that firms with existing overseas operations have an intrinsic incentive to support international trade agreements that promotes an open and stable global business environment. Being independent from other firm and industry features that can drive firms' reaction to trade policies, this effect reveals a firm-level political consequence of FDI. To test it, I collect the first data set on corporate public statement on trade in Chinese media, which provides a rare opportunity to reveal corporate policy positioning in a country with no lobbying disclosure requirement. I find that 1) the conventional perspective of the Chinese trade policy making being top-down is incomplete because firms are actively participating in this process with public statements; 2) foreign multinationals in China are not only economically active, but also politically active on China's trade policy making; 3) as Chinese firms extend their operations abroad, they have also become a vocal lobbyist of free trade agreements in China. These findings are robust against potential media reporting bias in China, and are comparable to the dynamics of corporate trade preference in the US context. Chapter 4 investigates how political connection shapes firm owner preference on economic openness and international competition in China, a topic that is getting increasingly relevant today amid China's trade disputes with its trading partners over the nature of the country's business-government relations. Politically connected entrepreneurs and their enterprises (PCEs) usually exploit and benefit from their political resources, but this can lead to both supporting and opposing views on expanding trade liberalization. To solve this puzzle, this paper proposes a theory that focuses on 1) a selection effect of political connection on firm productivity and 2) trade-related institutional development in China. With survey data on China joining the WTO, I develop a modified Bayesian IRT model to measure political connection and find that Chinese PCEs held a less supportive view before joining WTO than their less connected counterparts. This suggests an anticipation that the imminent opening would neutralize the privileges of PCEs.Subjects
corporate lobbying
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Thesis
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