Journal of Business Strategies

Fortune magazine published an article in February 2020 titled, “Boeing’s Long Descent”, regarding Boeing’s focus on paying high dividends to its shareholders at the expense of R&D. If Boeing had not been paying high dividends to its shareholders, it could have invested on R&D which would have been much more beneficial to Boeing in the long run. Is this phenomenon limited just to Boeing or do other firms who pay high dividends to their shareholders do it at the expense of R&D and Marketing which may give them a competitive advantage over other firms (their competitors) in the marketplace. This author thinks that the same principle applies to firms who are involved in share buybacks, i.e., firms who buy back their shares also do so at the expense of R&D and Marketing, thus risking the long-term competitive advantage of the firm.

By relying on upper echelons theory and agency theory, this study explores how CEO characteristics impact firms’ engagement in corporate political strategy (CPS). The current study proposes that depending on their CEOs’ tenure, firms have different interests and  incentives to make CPS investments. In addition, this study suggests that CEOs’ personal involvement in political activity affects their firms’ CPS investments. CEOs’ personal involvement in political activity could indicate agency problems between shareholders and CEOs. To explore this agency problem further, this study also examines how CEO duality moderates the relationship between CEO characteristics and CPS. This study uses a sample of 416 pharmaceutical firms in the U.S. from the year 2000 ­– 2010. The results show that CEO tenure positively affects CPS. Furthermore, CEOs’ personal involvement in political activity also positively influences CPS. The results also reveal that CEO duality weakens the relationship between CEO tenure and CPS.