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POLITICAL STRATEGY FORMULATION FOR INTERNATIONAL FIRMS:
A Dissertation
by
AMY JULIAN HILLMAN
DOCTOR OF PHILOSOPHY
August 1996
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POLITICAL STRATEGY FORMULATION FOR INTERNATIONAL FIRMS:
A Dissertation
by
DOCTOR OF PHILOSOPHY
■lfLC-VLA-
Albert Cannella Ramona Paetzold
(Member) (Member)
/?
u L [}J(njJrKebv^_
Frank B.amigartner Richard woodman
(Me&ber)
mber) (Head of Department)
August 1996
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ABSTRACT
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iv
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V
DEDICATION
bright in my heart.
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ACKNOWLEDGMENTS
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vii
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viii
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down. You have always been there for me and I will miss you
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TABLE OF CONTENTS
Page
A B S T R A C T ........................................ iii
DEDICATION ............................................ V
ACKNOWLEDGMENTS ...................................... vi
TABLE OF CONTENTS........................................ X
LIST OF T A B L E S ....................................... xii
LIST OF F I GU R E S................................... xiii
CHAPTER I INTRODUCTION ............................... 1
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xi
Page
Dependent Variable Measures .................... 84
Independent Variable Measures .................. 88
Validity and Reliability ........................ 92
Data A n a l y s i s .................................. 93
CHAPTER IV R E S U L T S .................................. 95
Descriptive Statistics .......................... 95
Tests of Underlying Assumptions ................ 100
Tests of H y p o t h e s e s .............................. 106
Firm Variables: Firm Resources-ROA................ 113
Number of E m p l o y e e s .............................. 118
Firm Experience/Legitimacy........................ 120
Institutional Variable: Corporatism/Pluralism . . 121
Industry Variable: Technical Nature ............ 125
Competitor's Perceived Use of Strategy .......... 126
Additional Analyses ............................ 127
Information Strategy ............................ 128
Cooperative Strategy ............................ 133
V I T A .................................................. 203
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xii
LIST OF TABLES
Page
TABLE 4.1 Dependent Variable Frequency .............. 96
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xiii
LIST OF FIGURES
Page
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1
CHAPTER I
INTRODUCTION
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this process is the one which has the greatest potential for
sustained competitive advantage.
Another characteristic that all of these strategy
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price sensitive.
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changing rates.
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CHAPTER II
DEVELOPMENT
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(Yoffie, 1988).
of the firm, to the extent they fit the environment (or when
the firm can shape the environment), are the major means by
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firm that cannot catch up with MNEs can still command higher
than average profits by generating rents through political
action, the same potential for rents holds for any firm,
(Boddewyn, 1993) .
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strategies.
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benefit all firms in the steel industry, not only the firms
that participated in the lobbying effort. Thus, given the
collective nature of the good, and the low marginal
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political strategies.
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and the possible variables that may affect the choice of such
actions.
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FIGURE 2.1
Getz's Model of Political Tactic Choice
Target
Type
Corporate
Agency
Political
Problems
Policy Tactic
Life Cycle
Type Stage
Organizational
&lndusty Variables
U>
44
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strategies that exist over time and across issues as the case
with a more relational approach to the policy process. For
example, the decision to join a trade association may not be
re-evaluated with each issue that may potentially affect the
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the U.S., crime was the number one issue for the general
public. However, after the Clinton administration's intense
focus on healthcare and the pressure the administration put
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Figure 2.2
Oberman*s Model of Political Strategy Formulation
Objectives
Resources
Strategy Choice Action Tactic Choice
External Institutions Policy -Activity Type
Choice -Collective/
Actor’s Coalitional
Threats Political Setting
Opportunites Resources
Politcy Antagonist’s
Political Resources
U1
52
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FIGURE 2.3
A General Model of Proactive Political Strategy Choice
Firm-Specific
Variables
Choice of Political
Tactics/Strategies
Industry -Information
Variables -Direct Access/
Pressure
-Constituency Buildinc
-Cooperative
Institutional/
Country-Specific
Variables
Ul
CO
54
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Firm-specific Variables
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how many people they employ. Firms may also join trade
associations or cooperate with other groups regardless of the
number of employees. Therefore, the use or non-use of these
types of strategies may not be related to the number of firm
employees.
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Oliver (1990) and Hillman and Keim (1995b) argue that many
new firms actually join trade associations to increase their
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to umbrella associations.
Rowan (1977) argued that norms and values may also become
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and they are often not the most important ones. Past policy
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Industry Variables
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Gannon, and Chen (1991) assert that many firm variables may
affect the likelihood and timing of competitive action and
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Summary/Conclusion
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CHAPTER III
RESEARCH DESIGN AND METHODOLOGY
Research Design
Sample Selection
The population from which the sample was taken for this
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compared with those firms that did not respond to the survey
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project.
Industry Variables: Technical Nature. The technical
(Hitt, Hoskisson, & Kim, 1996). R&D intensity has been used
as a proxy for innovation (Hitt, et al., 1996) and has been
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ID = E, [Pi x In (1/Pi) ]
where Px is the sales attributed to global market area I and
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Data Analysis
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CHAPTER IV
RESULTS
Descriptive Statistics
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TABLE 4.1
Dependent Variable Frequency
Approach-AP
Value Frequency Percent Cum Percent
Transactional .00 76 45 45
Relational 1.00 93 55 100
Total 169 100
Information Strategy-IN
Value Frequency Percent Cum Percent
Non-Use .00 20 11.8 11.8
Use 1.00 149 88.2 100
Total 169 100
Direct Access/pressure-DA
Value Frequency Percent Cum Percent
Non-Use .00 72 42.6 42.6
Use 1.00 97 57.4 100
Total 169 100
Constituency Building-CN
Value Frequency Percent Cum Percent
Non-Use .00 55 32.5 32.5
Use 1.00 114 67.5 100
Total 169 100
Cooperative Strategy-CO
Value Frequency Percent Cum Percent
Non-Use .00 9 5.3 5.3
Use 1.00 160 94.7 100
Total 169 100
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IN Tactics Continued
Tactic 2: Question 2 Value Frequency Percent Cum Percent
Non-Use .00 71 42.0 42.0
Use 1.00 62 36.7 78.7
2.00 35 20.7 99.4
3.00 1 0.6 100
Total 169 100
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DA Tactics Continued
Tactic 4: Question 9 Value Frequency Percent Cum Percent
Non-Use .00 135 80.5 80.5
Use 1.00 25 14.8 95.3
2.00 4 2.4 97.6
3.00 4 2.4 100
Total 169 100
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CN Tactics Continued
Tactic 6: Question 16 Value Frequency Percent Cum Percent
Non-Use .00 126 74.6 74.6
Use 1.00 33 19.5 94.1
2.00 8 4.7 98.8
3.00 2 1.2 100
Total 169 100
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strategy, the first four tactics had limited use and even
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TABLE 4.2
Independent Variable Frequency
Firm Resources-ROA
Mean 7.036
Std Dev 6.600
Minimum -19.9
Maximum 21.37
Valid Cases 169
Firm Experience-EX
Mean 32.325
Std Dev 25.105
Minimum 5.00
Maximum 170.0
Valid Cases 169
Number of Employees-SZ
Mean 1.627 (000s)
Std Dev 2.285
Minimum 0.100
Maximum 15.00
Valid Cases 169
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104
CO Q17 Q18 Q19
105
strategies. That is, the approach adopted for any given firm
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Tests of Hypotheses
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TABLE 4.4
Full Logistic Models
Model A
AP WITH ROA CP ID
Chi-Square df Significance
-2 Log Likelihood 179.769 165 .2043
Variable B S.E. Wald df
ROA .0196 .0283 .4815 1
CP 1.8401 .3136 34.4268*** 1
ID 1.2280 .5405 5.1628 1
Constant -5.7643 1.0446 30.4492 1
Model B
IN WITH ROA EX CP TC ID
Chi-Square df Significance
-2 Log Likelihood 104.482 163 .9999
Variable B S.E. Wald df
ROA -.0427 .0403 1.1207
EX .0217 .0165 1.7194
CP -1.1647 .3479 11.2067***
TC .0070 .0191 .1323
ID -1.3399 .8179 2.6833
Constant 6.2245 1.4705 17.9174
Model
DA WITH ROA EX CP TC ID
Chi-Square df Significance
-2 Log Likelihood 211.199 163 .0066
Variable B S.E. Wald df
ROA -.0767 .0306 6.3066***
EX -.0005 .0067 .0045
CP -.7182 .2299 9.7593***
TC -.0038 .0215 .0906
ID .7684 .4912 2.4474
Constant 2.2079 .8171 7.3022
Model
CN WITH ROA EX SZ CP TC ID
Chi-Square df Significance
-2 Log Likelihood 206.029 162 .0110
Variable B S.E. Wald df
ROA .0123 .0261 .2215
EX .0089 .0069 1.6851
SZ .0842 .0860 .9596
CP .3859 .2408 2.5679
TC .0109 .0139 .5108
ID .3502 .4900 .6003
Constant .6488 .8374 .6003
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Model E
CO WITH ROA EX CP ID
Chi-Square df Significance
-2 Log Likelihood 51.299 164 1.000
Model F
CM WITH CP ID
Chi-Square df Significance
-2 Log Likelihood 170.630 166 .3866
* P=<.10
**P=<.05
***P=<.01
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TABLE 4.5
Tests of Multicollinearity
AP= ID CP ROA
Collinearity Diagnostics
Number Eigenvalue Condition
Index
1 3.46664 1.00
2 .38613 2.996
3 .11810 5.418
4 .02914 10.908
IN= ID CP ROA EZ TC
Collinearity Diagnostics
Number Eigenvalue Condition
Index
1 4.66877 1.000
2 .55838 2.892
3 .39885 3.421
4 .22859 4.519
5 .11735 6.308
6 .02804 12.903
DA= ID CP ROA EZ TC
Collinearity Diagnostics
Number Eigenvalue Condition
Index
1 4.66877 1.000
2 .55838 2.892
3 .39885 3.421
4 .22859 4.519
5 .11735 6.308
6 .02804 12.903
CN= ID CP ROA SZ TC EZ
Collinearity Diagnostics
Number Eigenvalue Condition
Index
1 5.04921 1.000
2 .69335 2.699
3 .49372 3.198
4 .39365 3.569
5 .22399 4.748
6 .11638 6.587
7 .02700 13.676
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Ill
co= ID CP ROA EX
Collinearity Diagnostics
Number Eigenvalue condition
Index
1 4.13587 1.000
2 .43247 3.092
3 .28622 3.801
4 .11735 5.937
5 .02809 12.135
CM= ID CP
Collinearity Diagnostics
Number Eigenvalue Condition
Index
1 2.85160 1.000
2 .11869 4.902
3 .02970 9.798
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112
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TABLE 4.6
Approach Dependent Variable Models of Separate Effects
Model A
AP WITH ROA ID
Chi-Square df Significance
-2 Log Likelihood 229.690 166 .0008
*P=<.10
**P=<.05
***p=<.01
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TABLE 4.7
Cooperative Strategy Dependent Variable
Models of Separate Effects
Model A
CO WITH ROA ID
Chi-Square df Significance
-2 Log Likelihood 65.368 166 1.000
Model C
CO WITH CP ID
Chi-Square df Significance
-2 Log Likelihood 52.815 166 1.000
* P=<.10
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117
TABLE 4.8
Information strategy Dependent Variable Models
of Separate Effects
Model A
IN WITH ROA ID
Chi-Square df Significance
-2 Log Likelihood 120.582 166 .9968
Model D
IN WITH TC ID
Chi-Square df Significance
-2 Log Likelihood 120.350 166 .9970
***P=<.01
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118
Number of Employees
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TABLE 4.9
Constituency Building strategy Dependent Variable
Models of Separate Effects
A
CN WITH ROA 10
Chi-Square df Significance
-2 Log Likelihood 212.589 166 .0085
Variable B S.E. Wald df
ROA .0141 .0249 .3206 1
ID .2397 .4673 .2630 1
Constant .4262 .4454 .9157
B
CN WITH EZ ID
Chi-Square df Significance
-2 Log Likelihood 210.910 166 .0105
Variable B S.E. Wald df
EX -.0091 .0065 1.9769 1
ID .3612 .4736 .5818 1
Constant .7201 .4600 2.4506 1
c
CN WITH SZ ID
Chi-Square df Significance
-2 Log Likelihood 212.580 166 .0085
Variable B S.E. Wald df
SZ .0428 .0768 .3103 1
ID .2859 .4640 .3796 1
Constant .4164 .4488 .8607 1
D
CN WITH CP ID
Chi-Square df Significance
-2 Log Likelihood 209.992 166 .0118
Variable B S.E. Wald df
CP .3912 .2339 2.7968* 1
ID .3245 .4692 .4782 1
Constant -.5824 .7704 .5714 1
E
CN WITH TC ID
Chi-Square df Significance
-2 Log Likelihood 210.830 166 .0106
*P=<.10
**P=<.05
***p=<.01
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Firm Experience/Legitimacy
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TABLE 4.10
Direct Access/pressure Dependent Variable
Models of Separate Effects
Model A
DA WITH ROA ID
Chi-Square df Significance
-2 Log Likelihood 222.190 166 .0023
Model D
DA WITH TC ID
Chi-Square df Significance
-2 Log Likelihood 227.377 166 .0011
* P=<.10
**P=<.05
***p=<.01
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Additional Analyses
When examining the frequency distribution of the use of
the four strategy types, one can see that there is relatively
little variation in the use of two types of strategies: the
information strategy and the cooperative strategy. This may
be, as discussed earlier, a result of the sample firms
sharing common perceptions about the value of these strategy
types. This may also result from the fact that information
strategies tend to be the strategies most commonly used in
the U.S. (Lord, 1995) (with the exception of PAC
contributions) and that institutionally, the majority of the
countries in the E.U. have either formally or informally
stressed the importance of cooperative strategies such as
employers groups.
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Information strategy
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TABLE 4.11
Information Strategy Tactics Dependent Variable
Full Models
Model A
Q1 WITH ROA EZ CP TC ID
Chi-Square df Significance
-2 Log Likelihood 143.582 163 .8608
Model B
Q2 WITH ROA EZ CP TC ID
Chi-Square df Significance
-2 Log Likelihood 182.664 163 .1390
Model C
Q3 WITH ROA EX CP TC ID
Chi-Square df Significance
-2 Log Likelihood 218.854 163 .0023
* P=<.10
**P=<.05
***P=<.01
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Model D
Q4 WITH ROA EX CP TC ID
Chi-Square df Significance
-2 Log Likelihood 212.677 163 .0054
Model E
Q5 WITH ROA EX CP TC ID
Chi-Square df Significance
-2 Log Likelihood 211.599 163 .0062
*P=<.10
**P=<.05
***p=<.01
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model for this tactic, with all independent variables and the
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Cooperative Strategy
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TABLE 4.12
Cooperative strategy Tactics Dependent Variable
Full Models
Model A
Q17 WITH ROA EX CP ID
Chi-Square df Significance
-2 Log Likelihood 201.384 164 .0249
Variable B S.E. Wald df
ROA .0174 .0258 .4528
EX -.0051 .0065 .6192
CP .6604 .2526 6.8361***
ID -.1258 .5018 .0628
Constant -.7809 .8450 .8541
Model B
Q18 WITH ROA EX CP ID
Chi-Square df Significance
-2 Log Likelihood 178.623 164 .2058
Variable B S.E. Wald df
ROA -.0082 .0280 .0868
EX .0051 .0083 .3786
CP .8417 .2892 8.4720***
ID -.3797 .5505 .4758
Constant -.8248 .9304 .7858
Model C
Q19 WITH ROA EX CP ID
Chi-Square df Significance
-2 Log Likelihood 154.091 164 .6990
Variable B S.E. Wald df
ROA -.0207 .0290 .5090
EX .0362 .0144 6.2821**
CP .2004 .2765 .5252
ID -.7921 .6017 1.7329
Constant .7726 .9862 .6137
Model D
Q20 WITH ROA EX CP ID
Chi-Square df Significance
-2 Log Likelihood 76.405 164 1.000
Variable B .E . Wald df
ROA -.1315 .0538 5.9800**
EX .0271 .0202 1.7923
CP 2. 8071 .0411 7.2707***
ID -1.4134 .1252 1.5779
Constant -2.4583 2.4094 1.0410
*P=<.10
**P=<.05
*** P=<.01
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CHAPTER V
Discussion
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Discussion of Results
To conduct this study, a well-established taxonomy of
political strategies was necessary to advance our
understanding of the phenomenon. While the taxonomy
developed herein may not be the definitive list or
conceptualization, comparatively it is much more
comprehensive and exhaustive than many others identified in
the literature. By examining the inter-correlation statistics
in Table 4.2, one can see that the tactics that comprise each
of the four strategies are not only theoretically based, but
are also highly related to one another. In short, this is a
good first step to a broader look at the various options
available to firms in the political arena.
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TABLE 5.1
Summary of Results
HI: The larger a firm's financial resources, the greater the Not
likelihood of the firm using a relational approach to political Supported
strategies.
H2: The smaller a firm's financial resources, the greater the Not
likelihood of the firm using a cooperative strategy. Supported
H3: The greater a firms's financial resources, the greater the Not
likelihood of the firm using an information strategy. Supported
H4: The greater a firm's financial resources, the greater the Not
likelihood of the firm using direct access/pressure as a Supported
strategy.
H5: The greater a firm's financial resources, the greater the Not
likelihood of the firm using constituency building as a strategy. Supported
H6: The larger the number of a firm's employees, the greater the Not
likelihood of the firm using constituency building as a strategy. Supported
H7: The longer a firm has existed within a country or market, the Not
greater the likelihood of the firm using an information strategy. Supported
H8: The longer a firms has existed within a country or market, Not
the greater the likelihood of the firm using constituency Supported
building as a strategy.
H10: The newer a firm is to a country or market, the greater the Not
likelihood of the firm using direct access/pressure as a Supported
strategy.
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TABLE 5.1
CONTINUED
H16: The greater the technical nature of an industry, the greater Not
the likelihood of firms in the industry using a direct Supported
access/pressure as a strategy.
H17: The greater the technical nature of an industry, the greater Not
the likelihood of firms in the industry using an information Supported
strategy.
H18: The greater the technical nature of an industry, the lower Not
the likelihood of firms in the industry using constituency Supported
building as a strategy.
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once an issue arises that greatly affects the firm, this may
capital.
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ROA such that those firms with lower ROA are those most
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Given that this tactic was one of the two most commonly used
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employees.
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the media, despite the fact that its credibility (or lack
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further research.
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post-hoc.
are used for particular issue types or and which are used
across issues.
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identified herein.
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the Wald test. Future work could include the use of more
methods used.
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Third, the sampling method used for the study may also
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sample.
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strategic management.
and nonmarket.
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strategy formulation.
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participation.
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political strategy.
institutional arrangements.
making. This study examined four policy areas and found that
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their goals.
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formulation.
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studies.
Conclusions
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REFERENCES
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Finer, S.
1955. The political power of private capital.
Sociological Review, 3: 279-294.
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organizational considerations. A c a d e m y o f M a n a g e m e n t
Reviev, 20: 193-214.
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North, D. 1994.
Economic performance through time. The
American Economic Reviev, 84: 359-368.
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APPENDIX A
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All information gathered in the study w ill remain strictly confidential and only be
reported in the aggregate. The results o f the survey w ill be made available to EU
Committee members next spring. W e are asking you to complete the E U level
survey yourself and for your cooperation in completing a small number (3 or 4)
surveys o f your activity at the E U M em ber States o f your choice. Please feel free
to complete the individual nations surveys yourself or to pass it along to colleagues
directly responsible for that nation, whichever is most appropriate. Testing has
shown this survey to take only 10-15 minutes to complete.
Thank you for your continued support o f our activities and for your assistance in the
enclosed study.
Sincerely,
John Russell
European Affairs Manager
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APPENDIX B
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Thank you for taking the time to complete the enclosed survey of
political activity at the European level and for your assistance
in the completion of a small number (4 or 5) member state level
surveys. All responses will be kept strictly confidential and
only be reported in the aggregate. The survey enclosed is a part
of a broader study which will use your responses and information
gathered elsewhere to study the choice of political strategies in
the EU and within member states.
Once complete, only the 3 page answer sheet of each survey need
be returned. Please return as soon as possible via fax to a
private number at 409-694-8499 - No cover sheet is necessary or
by ma 1 1 to:
Amy Hillman
Department of Management
Texas A&M University
College Station, TX 77843-4221
Sincerely,
Amy Hillman
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APPENDIX C
SURVEY
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I . Company In fo rm atio n
1. Company N a m e _________________________________
4. Approximate size o f the company workforce in this country (employees & contractors)______________
5. Which sectors o f the economy does your company operate in? (Please list)
6. Respondents’ Title/Position:_______________
8 Have you personally ever been employed by the E U or member states in any legislative, executive, administrative, or
a Our company tends to wait until issues affecting us in this country arise before we dev elop plans and actions ir. an
attempt to influence these issues.
b Our company attempts todevelop relationships over timeso that when issues arise that ma; affect the wa> our
company operates in this country,the contacts are already in place to attempt toinfluence these issues
c Our company is generally interested in a variety o f public policy issues, and this facilitates on-going political
involvement in this country.
d. Relatively few public policy issues arise during any given year that our company is interested in so we tend to have
limited political involvement in this country.
10. Approximate number o f people involved in Government Relations/Issue Management for the company m this country
MEMBER STATESURIEYPAGE 1 O F 3
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11 How frequently does your company interact in any given year with
Not at all O n c e /Y e a r O nce/M on th OnceAVeek O nce/D ay
-Members of Parliament 0 1 2 3 4
-Assistants to members
o f Parliament 0 1 2 3 4
-Ministers '0 1 2 3 4
-Members o f the Minster’s
Personal staff 0 1 2 3 4
-C ivil servants in the
national bureaucracy 0 1 2 3 4
-C ivil servants in local areas 0 1 2 3 4
-Local elected officials 0 1 2 3 4
12. From the list above, please list the five targets o f your company’s attempt to influence or gain access to public policy that
you consider most valuable, with l=M ost valuable.
1 _______________
2 ________________
3 _______________
4 .________________________
5 .________________________
l Contacting, initiating discussions or providing information to public policy makers bv members o f the companv
0 l 2 3 ’ 4 '
2 .Contacting, initiating discussions or providing information to public policy makers by external professionals
0 l 2 3 4
3 .Reporting o f research results, publishing position papers, or technical reports
0 l 2 3 4
4 .Company members testifying before hearings/committees o f government bodies
0 1 2 3 4
5 .Commissioning research/think-tank research projects
0 1 2 3 4
6.Hiring individuals with political or professional bureaucracy experience to work for the company
0 1 2 3 ’ 4
7.Company members serving in a political position at the local, county or equivalent, national, or E U level
0 1 2 3 4
8 .Paying elected officials or civil servants to speak at your organization
0 1 2 3 4
9 .Providing paid travel or other benefits to elected officials or civil servants
0 1 2 3 4
10.Providing financial contributions to candidates or panics
0 1 2 3 4
11.Using economic and/or political education programs
0 1 2 3 4
MEMBER STATESURIEYPACE 2 O F 3
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22 From the list above, please list by number the five political tactics that you consider most valuable in your company's
efforts to influence or gain access to public policy in this country with l= M o s t valuable
1.____________________________
2.____________________________
3 ._________________
4 ._________________
5_________
23. A t what location in your company are decisions about the use o f the above tactics made1 Please check
Decisions are made completely at the Member State subsidiary
Decisions are made completely at the EU Level
Decisions are made completely at the home office in the US
Some decisions are made at all locations. I f you choose this, what is the basis for the decisions being made at
various levels? _________________________________________________________________________
24. How many competitors does your company have operating within this country1
None’ <5 <10 <20 2 0+
25. How frequently do you monitor the political strategies used by your competitors?
Never One/Year One/Month Once/Week Once/Day
26. Do you believe that your pattern o f political strategies differs from that o f your competitors?
Yes No
I f yes, in what manner? _____________________________________________________________________________
This is the end o f the member state survey. Thank you for completing this survey
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VITA
EDUCATION:
1987 B.A. Trinity University
Major: Political Science
ACADEMIC EXPERIENCE:
PROFESSIONAL EXPERIENCE:
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