The Impact of Corporate Political Activity on Corporate Reputation Amongst Industry Stakeholders

Abstract

Many firms have increased their expenditure on Corporate Political Activity (CPA) in an attempt to both influence the public policy process and to increase the corporate reputation (CR) of the firm. We first discuss the literature on the context and proactive political strategies involved in CPA, and the literature on CR. Our empirical study draws on this literature to examine the German food manufacturing industry, utilising expert interviews with nutritional scientists and NGO representatives, analysed using a qualitative, thematic analysis. Our findings and managerial implications centre around the reputational effect on the firm and competitors, and upon the metaphor of ‘issue islands’. Proactive CPA strategies and constituency-building, whilst seen as risky, had a positive effect on firm CR amongst the industry stakeholders if adopted over the long-term. CPA strategies can also provide a first-mover competitive advantage; competitors that subsequently adopt the same strategy do not receive the same reputational benefits. ‘Issue islands’ was a metaphor used by one industry stakeholder to describe how the stakeholder-specific perception of one issue does not necessarily affect another; for example, the nutritional scientists focused on product nutrition and not a commercial organisation’s advertising when constructing the CR of that organisation.