How does a firm’s global production affect its nonmarket strategy to shape its home country regulatory policies? This question lies at the intersection of globalization and corporate political actions, and it is becoming increasingly relevant today with nationalist discontent challenging the global order. To address this question, I develop a theory of regulatory arbitrage: in response to unfavorable regulatory outcomes at home, it is easier for firms with overseas operations to offshore more of their domestic operations abroad, resulting in an outflow of capital and jobs from the home country. Such real options to shift production across jurisdictions serve as an advantageous bargaining position for internationalized US firms in the lobbying process. To test it, I first demonstrate qualitative evidence with large-scale text data extracted from a novel repository of firm public statements in the media. Then I construct a 2007-2016 panel to show that US firms with overseas operations in the same sector are substantially more active in lobbying on US domestic regulations. These results suggest that international pressure for national regulatory change can also take place at the firm level, where firms’ global expansions give strength to their domestic political actions.
Bio: Yilang is a scholar of political economy and firm strategy, with a research focus on how firms’ overseas operations motivate their political actions in the US and China. His dissertation research is the winner of the Georgetown Best Paper in International Business and Policy award at the Academy of Management (AOM) 2019 Annual Meeting. His previous research papers have been published in Review of International Organizations and Political Science Research and Methods.
Yilang currently works at Harvard University as a Postdoctoral Fellow in the China and the World Program. He recently completed my Ph.D. in political science and dual masters in statistics from the University of Michigan.