All Politics Are Local: Corporate Political Power and the Award of Federal Contracts

• In Event: Money and Politics

Abstract

Political power is one of the most heavily discussed issues in political economy although prior researchers provide few metrics for its estimation. This study introduces a new set of corporate political power measures using the political power of individual legislators and firms’ political contributions. We find that these measures of a firm’s political power help to explain success during the federal contracting process. Our results show that local politicians offer the greatest advantage to a firm in securing contracts. Further analysis implies that local politicians are motivated to support these firms to improve voter employment and their likelihood of re-election. We also find that firms seek to restore any decline in political power by reallocating their contributions to more electable politicians.

Authors

• Reza Houston, Ball State University

• Stephen P. Ferris, Indiana University of Pennsylvania