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Shedding Light on the Dark Side
of Firm Lobbying:
A Customer Perspective
Vadakkepatt, Arora, Martin, and Paharia (2021)
Background
• Lobbying is a critical mechanism through
which firms influence policy makers.
• Lobbying expenditures have grown in
the past two decades and an increasing
number of firms now have government
affairs functions.
• Importantly, past studies have shown
that lobbying results in increased firm
value, generally through paths that are
not customer focused.
Vadakkepatt, Arora, Martin, and Paharia (2021)
Key Takeaway 1
• Lobbying reduces firm customer satisfaction
and therefore reduces the positive impact of
lobbying on firm value.
• The negative effect of lobbying on customer
satisfaction is because the dual focus on
regulators and customers leads to customer
focus loss.
Implication: A firm’s non-product market
strategy can influence its product market
performance because companies might be
unable to simultaneously balance two disparate
activities.
Vadakkepatt, Arora, Martin, and Paharia (2021)
Key Takeaway 2
• A marketing CEO, firms’ resource allocation on marketing
activities, namely advertising and R&D spending, and product-
issue lobbying can reduce the negative effect of lobbying on
customer satisfaction.
Implication: Firms have access to customer-focused strategic
levers which could be used to minimize the negative effect of
lobbying on customer satisfaction.
Vadakkepatt, Arora, Martin, and Paharia (2021)

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

  • 1. Shedding Light on the Dark Side of Firm Lobbying: A Customer Perspective Vadakkepatt, Arora, Martin, and Paharia (2021)
  • 2. Background • Lobbying is a critical mechanism through which firms influence policy makers. • Lobbying expenditures have grown in the past two decades and an increasing number of firms now have government affairs functions. • Importantly, past studies have shown that lobbying results in increased firm value, generally through paths that are not customer focused. Vadakkepatt, Arora, Martin, and Paharia (2021)
  • 3. Key Takeaway 1 • Lobbying reduces firm customer satisfaction and therefore reduces the positive impact of lobbying on firm value. • The negative effect of lobbying on customer satisfaction is because the dual focus on regulators and customers leads to customer focus loss. Implication: A firm’s non-product market strategy can influence its product market performance because companies might be unable to simultaneously balance two disparate activities. Vadakkepatt, Arora, Martin, and Paharia (2021)
  • 4. Key Takeaway 2 • A marketing CEO, firms’ resource allocation on marketing activities, namely advertising and R&D spending, and product- issue lobbying can reduce the negative effect of lobbying on customer satisfaction. Implication: Firms have access to customer-focused strategic levers which could be used to minimize the negative effect of lobbying on customer satisfaction. Vadakkepatt, Arora, Martin, and Paharia (2021)