When Should the Small Firm Be Involved in Public Policy

Abstract

The relationship of business and government has changed markedly over the last four decades, forcing many executives to revise how they think and act relative to public affairs issues. The growth years of the U.S. economy throughout the 1950s and most of the 1960s allowed business to be fairly complacent in terms of political activity. Firms had only to consider their own political goals (Kaufman, Marcus, and Zacharias 1987). This philosophy defined the ground rules for corporate political action until the 1970s, when declining economic conditions challenged corporations to discover new means of coordinating the economy without centralizing authority in the business sector or in governmental agencies (Neal 1981). Failure to do so helped prompt the call for more government intervention in the economy, particularly with issues thought by many business people to be clearly under managerial control (Marcus, Kaufman, and Beam 1987). Through subsequent expansion of government's role in the economic and social issues, the business community began to learn the costs of complacency. Consequently, the 1980s saw business expanding its influence in the legislative process (Levitan and Cooper 1984). Today, the continued growth of government intervention in the economy, the power of unions, and the rise of public interest groups have shattered the view that firms can wait for problems to arise before acting (Yoffie and Bergenstein 1985). Whether through economic, national security and regulatory policies, or industrial incentives and constraints, most executives now acknowledge that government meaningfully affects a firm's performance, operations, and markets. In many industries, the political success of a business is no less important than marketplace success (Marcus, Kaufman, and Beam 1987). Other authors have defined and examined the business/government relationship. For instance, Buchholz (1988) states that managing the public policy process implies there is a public policy issue that affects many parties, including the firm. The public policy issue would also require collective action for resolution. He describes a generic system for strategically managing public policy issues, useful once a firm decides to become involved in the public policy process. Shipper and Jennings (1984) believe that businesses, regardless of the political sentiment at the time, need to develop a proactive and constructive position for incorporating new knowledge into national policy. Kaufman, Marcus, and Zacharias (1987) note that corporations, primarily through their public affairs function, have tried to manage politics by having public officials act according to the firm's preference and by attempting to align public values in a manner consistent with managerial autonomy. While useful, these strategies and models have been developed from, and are primarily applicable to, large firms. Large firms often possess entire public affairs and government relations departments that specialize in analyzing and tracking issues and affecting the public policy process. Further, these authors imply that, for the situations they have studied, the decision by a firm to become involved in the public policy process usually has already been made. Generally missing from the literature has been research into public policy involvement of small to medium-sized firms (here defined as between 20 and 500 employees), a group that constitutes the vast majority of private sector businesses in this country (Thompson and Smith 1991). Despite their size, these companies are often heavily affected by public policy dynamics; yet, because of resource constraints of time, money, and personnel, they must adapt to these dynamics in ways quite different from the large corporation. It was with this in mind that we set out to study what causes public policy involvement among small to medium-sized firms. METHODS Using a qualitative, grounded-theory approach (Glaser and Strauss 1967), we interviewed and observed 40 executives over a four-year period. …