Why Compete for Firms? Electoral Effects of Corporate Headquarters Relocation

Abstract

Why do local and state governments in the United States compete to attract and retain corporations in their jurisdictions even by offering generous incentives, which can jeopardize public spending on other needs? This research shows that the answer can lie in the electoral effects of headquarters (HQ) relocation. Using an original data set of interstate HQ relocation cases covered in the news media from 1995 to 2015, this research finds that interstate business location decisions affect gubernatorial election outcomes. However, empirical analyses provide evidence that voters use different attribution processes when considering HQ relocation-in versus relocation-out cases: HQ relocation-out results in greater support for Republican candidates, whereas HQ relocation-in increases support for the incumbent party. Supplementary analyses suggest that the perceptual effects and symbolic value of HQ relocation, rather than its immediate local economic effects, drive electoral outcomes. The findings have implications for electoral accountability and the political economy of business–government relationships.