The “Make and/or Buy” Decisions of Corporate Political Lobbying: Integrating the Economic Efficiency and Legitimacy Perspectives

In this article I examine political lobbying and investigate firms’ decisions to employ internal functionalities (i.e., to “make” or insource), to contract with external professionals (i.e., to “buy” or outsource), or to do both (i.e., to “make and buy” or plural source). I first develop an integrated framework based on the twin perspectives of economic efficiency and legitimacy. When the political audience faces little uncertainty about lobbying content, firms make sourcing decisions to maximize economic efficiency in producing such content in line with transaction cost economics and the capabilities view. However, when the political audience faces substantial uncertainty about lobbying content, it relies on the perceived legitimacy of the lobbying entity to draw inferences about the quality of such content; therefore, the legitimacy of a potential lobbying entity matters to firms making sourcing decisions related to lobbying. I then connect firms’ sourcing decisions with several concrete characteristics...