A house divided: Legislative competition and young firm survival in the United States

• 成果类型: Article
• 署名作者: Raj, Manav
• 署名单位: New York University
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.3283
• 发表日期: 2021
• 页码: 2389-2419
• 关键词: Entrepreneurship; environment; institutions; nonmarket strategy; Political strategies

摘要

Research Summary Features of the institutional environment influence the performance of firms. In this research, I examine how one aspect of the institutional environment, competition between parties within legislatures, relates to young firm mortality. I argue that higher legislative competition provides legislators with more power to reward favored interests and thus contributes to a competitive environment that benefits well-connected incumbents and imposes negative consequences on young firms. Using data on state legislature composition in the United States and both an ordinary least squares and instrumental variables empirical strategy, I find that legislative competition has a positive relationship with young firm mortality and this relationship is partially mediated by incentives that favor incumbents. In doing so, I highlight that political competition can have negative consequences for some firms. Managerial Summary In this research, I examine how competition between parties within state legislatures affects the survival of young firms. I argue that higher interparty competition provides legislators with greater bargaining power to obtain policy rewards for favored constituents and that this can lead to a competitive environment that favors well-connected incumbent firms and disadvantages younger firms. I find that interparty legislative competition has a positive relationship with young firm mortality and that this relationship is partially accounted for by the use of subsidies and incentives that favor incumbents. Through this research, I show that political competition may be harmful to some firms and highlight the importance of government institutions on firms and markets.