We Fly Congress: Market Actions as Corporate Political Strategy in the U.S. Airline Industry

Abstract

The literature on corporate political activity (CPA) generally views nonmarket actions aimed at influencing political actors (e.g., lobbying or campaign contributions) as related but separate activities from market actions. This study demonstrates how firms’ core market actions (e.g., market entry or geographic expansion) can function as CPA. We theorize two mechanisms through which firms leverage market actions as CPA—“pork” and “perk.” We document these mechanisms through an empirical analysis of data from the U.S. airline industry over 30 years (1990-2019). Specifically, we find that airlines increase the supply of flights from airports in the home district of the Chair of the Transportation Committee of the U.S. House of Representatives (pork). Moreover, this increase in flight supplies is negatively associated with formal policy changes in Congress. We also find that the airlines increase the supply of flights to Washington, D.C. from the home district of the Speaker of the House and the home state of the Senate Majority Leader (perk). We contribute to the literature on CPA by demonstrating a blurred boundary between market and nonmarket actions, which may help explain firms’ competitive actions that cannot be explained by market considerations alone.