Green Product Portfolio and Environmental Lobbying

Abstract

Nowadays, a growing number of firms utilize corporate lobbying to advocate for more environmentally friendly policies and regulations, deviating from the traditional lobbying mainly used to minimize regulatory burdens. In this study, we investigate what motivates firms to engage in such an unusual type of lobbying - environmental lobbying. Focusing on the product strategy of firms, we suggest that firms with greater green product intensity are more likely to engage in environmental lobbying. When environmental lobbying raises environmental hurdles in the market, firms with an intensive focus on green products can bear adjustment costs with little effort, leaving other less green firms relatively disadvantaged under the newly regulated market conditions. Moreover, those firms can address demand-side issues more easily by lobbying the government to provide greater incentives for purchasing green products or to request subsidies that can be used to improve their cost structure. Our analyses based on the US light vehicle market indicate that, indeed, the more electric vehicles automakers sell relative to their total sale volumes, the more they will engage in environmental lobbying. We also find that this relationship becomes more salient when a firm has greater market share or originally comes from a foreign country with more stringent environmental regulations than the United States.