Paul Ingram

Laws of Attraction: Regulatory Arbitrage in the Face of Activism in Right-to-Work States

Coauthor(s): Hayagreeva Rao, Lori Qingyuan Yue.

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Abstract:
Extant research recognizes that firms exploit regulatory variations to their advantage but depicts such regulatory arbitrage as a dyadic process between firms and regulators. We extend this account by including the political rivals of a firm and suggest that firms view regulatory differences as part of a corporate political opportunity structure, and exploit regulatory variations to disadvantage their rivals. Empirically, we focus on variations in right-to-work (RTW) laws which signal the pro-business climate in a state and exist in twenty-two of the 50 American states. Using a spatial-regression discontinuity design, we analyze how Wal-Mart locates new stores in the face of anti-Wal-Mart activists and exploits regulatory discontinuities on the borders between RTW and non-RTW states. We find that Wal-Mart is more likely to propose new stores at the borders of RTW states, and to open those stores if they are protested, compared to the borders of neighboring non-RTW states. We discuss implications for the study of regulation, social movements, and organizations.

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