Unraveling the Impact of Distributed Government Authority: Evidence from OSHA Oversight of Defense Contractors

Corporate political activity (CPA) research often focuses on single-government interactions, overlooking the complexities of distributed government authority. Drawing from contracting literature, our study explores the implications of distributed government authority for firm outcomes in the CPA arena. Specifically, we investigate how different types of contractual arrangements with resource-granting agencies—fixed-price contracts (which allocate risk to firms) versus cost-plus contracts (which shift risk to resource providers)—affect the frequency of discretionary oversight by independent regulatory agencies. Fixed-price contracts, with their predefined budgets and extensive preaward vetting, alleviate oversight agencies’ concerns about contractor opportunism, leading to reduced oversight intensity. In contrast, cost-plus contracts, with their reimbursement-based structure and operational flexibility, necessitate increased oversight due to risks of contractor opportunism. We further examine how two situational factors—contract duration and negative media coverage of labor issues—moderate these relationships. Using data on U.S. Department of Defense contracts and Occupational Safety and Health Administration oversight, our study advances the CPA literature by highlighting the importance of considering the intricate dynamics of distributed authority in shaping the returns from corporate political activities.

Supplemental Material: The online appendices are available at https://doi.org/10.1287/orsc.2024.19026.