Entrepreneurial Orientation and the Creative Constraint of Corporate Political Activity

Organizations engage in corporate political activities (CPA) for a variety of reasons, though one widely accepted benefit is lowering a firm’s overall level of uncertainty. Yet CPA comes with its own set of costs, including restricting new market opportunity exploitation as firms invest scarce resources in government relationships rather than market opportunities. We argue that CPA creates ties to the government that binds a firm’s creative freedom, and this is too steep a cost for entrepreneurially oriented (EO) firms as EO firms prioritize experimentation to exploit new market opportunities, and embrace uncertainty. We also examine the contingent nature of this relationship based on two aspects of the focal firm’s rivals: the extent to which rivals receive government subsidies, and the extent to which the rivals incur regulatory sanctions. We test our hypotheses on a sample of S&P 1500 firms and find support for our theorized model.