Political Polarization and Nonmarket Strategy over the Policy Life Cycle

Growing political polarization has reshaped the business landscape, shifting the mix of private and public politics companies face and requiring managers to develop more sophisticated nonmarket strategies. Yet the literature has largely continued to study strategies aimed at public and private politics in isolation. We analyze repertoires of nonmarket strategies and how they evolve over time in a formal game theoretic model of the policy life cycle, providing an integrated framework for studying public and private politics. Industry may resist activist campaigns or concede to them and may also lobby to block legislation when public politics is viable. The evolution of public opinion in a polarized world divides the game into two distinct phases, an initial phase of pure private politics and a subsequent phase with both public and private politics. Polarization delays social consensus and intensifies activism while increasing industry resistance to it. As public concern about an issue rises over time, industry resistance to activist campaigns weakens, and lobbying becomes costlier and less likely. We reveal important complementarities between strategies: The ability to lobby in the latter phase makes industry more resistant to activist campaigns during both phases of the life cycle. Our analysis demonstrates clearly and precisely how suboptimal strategic decisions may result from a failure to fully coordinate nonmarket strategy instruments.

This paper was accepted by Anita McGahan, business strategy.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2025.00819.