Corporate campaign contributions
After the 1996 telecom deregulation, American cable, broadband, and phone companies became highly strategic in their campaign finance strategy, using donations to state legislators to gain advantage with appointed regulators.
And when their competitors started opening their wallets, companies and PACs became even more generous, according to new research.
“The Market for Legislative Influence Over Regulatory Policy,” forthcoming in Advances in Strategic Management, illustrates how telecom companies—from established providers such as Ma Bell to the newer players in local markets—have used campaign donations to create their own channel of influence.
“Firms are clearly trying to manage their regulatory environment, and even if they don’t want to donate, they have to respond when their competitors [do],” says Rui J.P. de Figueiredo, an associate professor in the Haas Business and Public Policy Group and the paper’s co-author, along with Geoff Edwards, PhD 04.
Incumbents wanted to maintain their advantage by keeping prices for access to telephone networks high, while newer entrants wanted prices low so they could compete. “Firms may not always agree on what they want from regulators, but they are essentially required to try to influence policy in states where regulation is up for grabs,” says de Figueiredo.
The study also found that regulators who are political appointees are generally more responsive to companies than elected ones. The firms donate more, and expect their contributions to have a bigger effect, when regulators are beholden to the legislature for their positions.
The study’s findings are based on data collected from FollowTheMoney.org, a non-partisan archive of political contributions and their sources. The study also factored in the characteristics of the donating firms, the political environment, and the state’s demographics.