Laws of Attraction: Regulatory Arbitrage in the Face of Activism in Right-to-Work States
American Sociological Review, 76(3): 365-385, 2011
Posted: 7 Nov 2012
Date Written: 2011
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 Walmart locates new stores in the face of anti-Walmart activists and exploits regulatory discontinuities on the borders between RTW and non-RTW states. We find that Walmart 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.
Keywords: Right to work law, Walmart, regulation, protest
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