Research Archive

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

Hayagreeva Rao, Lori Qingyuan Yue, Paul Ingram

Publication type: Journal article

Research Archive Topic: Leadership, Organizations

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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Citation

Rao, Hayagreeva, Lori Qingyuan Yue, and Paul Ingram. "Laws of Attraction: Regulatory Arbitrage in the Face of Activism in Right-to-Work States." American Sociological Review 76, no. 3 (June 2011): 365-385.


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