Shedding Light on the Dark Side of Firm Lobbying: A Customer Perspective

Abstract

Firms spend a substantial amount on lobbying—devoting financial resources on teams of lobbyists to further their interests among regulatory stakeholders. Previous research acknowledges that lobbying positively influences firm value, but no studies have examined the parallel effects for customers. Building on the attention-based view (ABV) of the firm, the authors examine these customer effects. Findings reveal that lobbying negatively affects customer satisfaction such that the positive relationship between lobbying and firm value is mediated by losses to customer satisfaction. These findings suggest a dark side of lobbying and challenge current thinking. However, several customer-focused moderators attenuate the negative effect of lobbying on customer satisfaction, predicted by ABV theory, including the chief executive officer’s background (marketing vs. other functional area) and the firm’s strategic use of resources (advertising spending, research-and-development spending, or lobbying for product market issues). These moderators ensure consistency between lobbying and customer priorities or direct firm attention toward customers even while firms continue to lobby. Finally, the authors verify that lobbying reduces the firm’s customer focus by measuring this focus directly using text analysis of firm communications with shareholders. Collectively, the research provides managerial implications for navigating both lobbying activities and customer priorities, and public policy implications for lobbying disclosure requirements.

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