Collective irresponsibility: corporate reputations and the role of associations in lobbying

Abstract

Why do companies sometimes lobby legislators directly and sometimes act predominantly through business associations? Although economic factors, such as size and profitability, are well-known determinants of companies’ decision to lobby, they alone cannot explain the choice in lobbying strategies. This paper provides an explanation for why companies sometimes choose to lobby collectively: reputation. When firms want to lobby in favor of a publicly unpopular position, channeling their efforts through business associations can help them shield themselves from reputational consequences. To test this theory, this paper provides evidence from firms’ lobbying on climate change. Combining climate-friendliness ratings of corporate lobbying with an original survey experiment, it demonstrates the existence of reputational costs from lobbying alone and shows that lobbying through business associations helps firms avoid such costs. For the study of lobbying positions, these results imply important systematic differences in the positions firms take alone and collectively.