Definition of Lobbying and Influence of the Corporate Political Strategies

Introduction

Lobbying also called interest representation is a method to impact policies or decisions of government officials. This action mirrors the act of manipulation and corruption. On account of this, the lobbying subject is a highly controversial issue in our society. Past events stimulated citizens to question the necessity of lobbying. In general, three key players are involved in lobbying – first the government, they are influenced, second the corporates, which represents those who want to influence and third the society, which the outcome applies to.

The governance of processes can be influenced on different levels “local, regional, national, European Union and global” (Figge, 2019, p.5). In consideration of public interest, this paper will investigate the impact and outcome of corporate political strategies on the European Union level.

Firstly, the paper explains how corporate political strategies can impact the firm through public policies. Secondly, it describes different political strategies and their advantages. Thirdly, the paper will define how corporate political strategies are influenced by societal-political context by discussing the system and structure and governance of the European Union.

The impact of corporate political strategies

Many corporates want to create value to gain a competitive advantage. There are different ways to achieve a competitive advantage. One of them is the use of corporate political strategies. The strategic political management is the “set of strategic actions that firms plan and enact to maximize economic return from the political environment” (Oliver, Christine & Ingo Holzinger, 2008). In the research paper “The Effectiveness of Strategic Political Management: A Dynamic Capabilities Framework” the authors Oliver, Christine and Ingo Holzinger (2008) developed a framework to better understand the impact of corporate political strategies. The framework shows two key factors that impact the firm-level outcomes. First, the motives of political management, which is influenced by firm and industry characteristics. Second, the political management strategies, that are affected by political dynamics and dynamic capabilities. The motives of political management are to create value and to maintain the created value. However, this can be impacted by the industry characteristics. Industries are more likely to engage if they operate in a more concentrated market and are affected by macroeconomic policies (Oliver, Christine & Ingo, 2008).

Another impacting factor is the firm characteristic – three key factors decide if a firm is more likely to engage in the political environment – size, material interest and issue salience. (Oliver, Christine & Ingo, 2008). There are four different political management strategies – reactive, anticipatory, defensive and proactive. The strategies are affected by the dynamic capabilities and political dynamics. Dynamic capabilities “allow firms to capitalize on political opportunities and generate unique sources of economic rent as opportunities arise from changes in public policies” (Oliver, Christine & Ingo Holzinger, 2008). Political dynamics interact with the decision of choosing the right strategy. The affected public policies then decide what the firm-level outcomes are and if it is of competitive advantage. A successful strategy should lead to a competitive advantage.

Different political strategies

As mentioned above there are four different corporate political strategies. These four strategies can be divided into groups by their strategic orientation and value perspective. The defensive and proactive strategy focuses on external capabilities. (Oliver, Christine & Ingo Holzinger, 2008). The defensive strategy is about “defending an advantage that has gained and opposing any evolution in the legislation” (Guégen, 2007, p. 120). Outcomes could be the increase of barriers of entry through protective pricing structures. The proactive strategy has three key tools “credibility (…), transparency (…) and construction (…)” (Guégen, 2007, p. 124). This strategy is a “redefinition of public policy to fit into the firm´s strengths or interests” (Oliver, Christine & Ingo Holzinger, 2008, p. 507). The following strategies focus on internal capabilities. The reactive strategy is “based on waiting, taking no action, and having no strategy” (Guégen, 2007, p. 123). The anticipatory strategy can lead to “first mover advantages and enhanced reputation” (Oliver, Christine & Ingo Holzinger, 2008, p. 507). Guégen (2007) speculated that the most commonly used lobbying strategy is reactive one. Choosing the right strategy depends on the firm´s capabilities. With the reactive strategy “the speed, efficiency, and innovativeness of architectural reconfiguration capabilities will determine the extent of their effectiveness” (Oliver, Christine & Ingo Holzinger, 2008).

The anticipatory strategy requires “frequency, breadth, innovativeness, and timeliness of scanning capabilities” (Oliver, Christine & Ingo Holzinger, 2008) to determine the effectiveness. For the defensive strategy the “breadth and depth of trust and relational bonds in social contacts with the government” (Oliver, Christine & Ingo Holzinger, 2008) is of importance. In contrast, the effectiveness of proactive strategy depends on the “breadth and depth of a firm´s embeddedness in its economic and political environment” (Oliver, Christine & Ingo Holzinger, 2008). In short, the effectiveness depends on the firm´s internal and external oriented dynamic capabilities. However, it has to be considered that these factors have to be adjusted if the environment changes.

Influence by societal-political context

Before answering the question of how corporate political strategies are influenced by societal-political context. First, the environment has to be characterized. There are two options: corporatist systems, where only a few lobbying groups are involved with public decision-making. In contrast, a pluralist system consists of many interest groups, which can individually impact the decision-maker. Magone (2011) Europe falls in the latter category – the pluralism system. As presented in Neuhold (2019) lecture, there are approximately 15000 lobbyists and 2500 lobbying organization in Brussels. Furthermore, the structure and governance of the European Union have to be clarified. In general, seven institutions compromise the European Union – the European Commission, the European Parliament, the Council of Ministers, the Court of Justice, the European Council, the European Central Bank and the Court of Auditors. However, when decisions are made three key players are of importance – the European Commission, European Parliament and the Council of Ministers (Neuhold, 2019, p.3). The European Commission proposes and oversees the implementation and the general interest should be represented not the national one. The European Parliament is the only legislative institution for 28 member states.

Besides the legislative power, they also have budgetary power and control over the executive power – in this case, the European Commission. The Council of Ministers represents the government of the member states. Further, this institute shares legislative and budgetary power with the Parliament. Also, the Council decides on foreign affairs. As a European Union citizen, one can vote their preferred representative into the European Parliament. In the societal context, one citizen alone is not enough to influence lobbying strategies. Nevertheless, the are existing lobbying groups that represent the public interest. In the political context, different reforms can be implemented to make lobbying more transparent or to limit lobbying.

Conclusion

Consequently, to refer back to the problem statement which investigated the impact and outcome of corporate political strategies on the European Union level. Corporate political strategies are often used as a tool to gain competitive advantage. These strategies have to be aligned with the firm and the environment itself. Moreover, it is important to understand the societal-political impact. In general, the idea of lobbying to represent the public interest. However, throughout the years lobbying especially business lobbying has become a lucrative business. With the acquired knowledge in the past two weeks, I have concluded that corporate political strategies are an enrichment to our society and should not be viewed negatively. It is in some ways “legal bribery” however the decision to accept the bribe or to refuse lays with the decision-maker.