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 DOI: 10.1177/1465116509103366

2009 10: 155European Union PoliticsPatrick Bernhagen and Neil J. Mitchell

The Determinants of Direct Corporate Lobbying in the European Union  

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The Determinants of Direct

Corporate Lobbying in the

European Union

Patrick Bernhagen

University of Aberdeen, UK

Neil J. Mitchell

University of Aberdeen, UK

A B S T R A C T

Whereas research on corporate lobbying in the USA has

produced a set of robust findings, less is known about the

determinants of business political action in other policy

arenas and beyond the nation-state. In particular, we do not

know how well the standard profit-seeking model of firm

political activity travels. The article examines this issue with

an analysis of business lobbying in the EU that reflects tacti-

cal adaptation to lobbying at the supranational level. Using

data on 2000 large companies, we show that a modified

profit-seeking model of corporate political behaviour is

generalizable to corporate lobbying in Brussels. By contrast,

theories emphasizing nationally distinct types of interest

intermediation find little support in the data.

1 5 5

European Union Politics

DOI: 10.1177/1465116509103366

Volume 10 (2): 155–176

© The Author(s), 2009.

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K E Y W O R D S

� business interests� corporatism� large firms� lobbying� transnational

corporations

What factors prompt firms to become politically active at the level of theEuropean Union (EU)? Do German and French firms, and those from othernational capitalisms, distinguish themselves from Anglo-American firms? IsEU lobbying behaviour shaped by national legacies and different types ofinterest representation or do large corporations pursue similar political tacticsregardless of their political origins? In order to answer these questions, webuild on a parsimonious theoretical argument that has been supported bydata on business lobbying in the USA. Systematic analysis of the US casesuggests that firms enter the political arena primarily to obtain benefitsderived from a policy-maker’s use of incentives and coercive powers (e.g.Grier et al., 1994). We examine how this theoretical argument holds up in thecontext of the institutional constraints and opportunities of the EU andidentify on the basis of EU and interest group research how it might bemodified as the political arena shifts to the supranational level.

Scholars on both sides of the Atlantic have highlighted the need for a morecomparative research framework if advances are to be made in our under-standing of the way interest group behaviour is influenced by institutions.Three specific obstacles to progress can be identified: First, in a review ofinterest group research in Europe and the USA, Mahoney and Baumgartner(2008) point out that the European literature and the US literature on lobbyingand special interest politics have developed largely independently over severaldecades. Second, although the European policy arena has been likened to thatof Washington DC in terms of private lobbying (Hix, 2005: 222), rather little isknown about the generalizability of findings generated within specific nationalcontexts – such as the American one (Grier et al., 1994; Hart, 2001). As Woll(2006: 456) notes, ‘the most interesting parallels exist between Washington andBrussels, but unfortunately there have been very few attempts to explore theconnection between the American literature on lobbying and EU studies’.Third, scholars have identified the need for a shift from ‘exploratory anddescriptive studies to more confirmatory theory testing’ (Coen, 2007: 334).Recently, some advances have been made in that direction. Mahoney’s (2008)work on lobbying success, for instance, compares interest group activity inWashington and Brussels, and recent special issues on EU interest grouppolitics include theory-driven, systematic (qualitative and quantitative)analyses of influence-seeking behaviour.1 But, in comparison with the USliterature on the determinants of direct firm lobbying, the main focus in theEuropean literature is on business associations rather than direct firm lobbying(Beyers, 2004; Eising, 2004, 2007).2

In this article, we address some of these concerns by analysing direct firmlobbying in the EU. Drawing from the US and European literature on specialinterest politics, we start with a simple model of business political action. We

European Union Politics 10(2)1 5 6

then identify the main institutional characteristics that distinguish theEuropean political arena and modify the model to accommodate the multi-level nature of the political system of the EU. The empirical analysis uses dataon the Forbes Global 2000 companies, which include American, Asian andEuropean firms, and their decisions to be politically active in a common arena.Many of these large firms, European or otherwise, have substantial interestsat stake in this policy arena. The countries included in the data set are closeto exhaustive of the observed modes of interest group intermediation, rangingfrom corporatist systems with a strong role for industry bodies based oncompulsory membership to pluralist ones that more closely resemble the UScontext. We begin with the theoretical argument. We then discuss the researchdesign, data and measurement, before presenting and discussing the empiri-cal results in the light of recent contributions to EU interest group research.

Determinants of firm lobbying in the EU

Lobbying is one of several political activities pursued by firms. In additionto signalling their interests directly to policy-makers, firms may participatecollectively and express their interests through an association, they mayparticipate financially in elections through contributions to candidates orparties or they may seek to influence public opinion and other external actorsthrough philanthropic and other voluntary behaviour. Of these activities,direct firm lobbying is the most instrumental and narrowly targeted onspecific benefits for the firm (Hansen and Mitchell, 2000). In the US literature,such instrumental behaviour is captured by a standard model of corporatepolitical behaviour. This standard profit-seeking model of firm politicalactivity derived from the US context provides a simple, general and nowfamiliar account of why firms lobby governments (Andres, 1985; Grier et al.,1994; Stigler, 1971). In short, government decisions about how to use coercivepowers and distribute resources have important consequences for firms.Accordingly, firms have incentives to engage in political activity in order toobtain revenues and avoid costs. In competitive industries, smaller firms havea free-rider disincentive for seeking industry-wide or even business-widebenefits. The expectation is that, while adjusting tactically to particular insti-tutional environments and incentives, large corporations will pursue similarpolitical tactics regardless of their national origins.

In the European literature, two main institutional features are identifiedthat may affect a firm’s decision to lobby EU policy-makers directly. First,transnational corporations from outside the EU face incentives for directpolitical action that are not shared by firms from within the member states:

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 5 7

the absence of government patrons that can advance and safeguard theinterests of their national business communities in EU policy-making insti-tutions. Schneider and Baltz (2003: 3) point out that interest groups withinthe EU can represent interests directly to the EU institutions or, because ofthe importance of the Council of Ministers, they can lobby at the domesticlevel. In the words of Cowles (1997: 126),

the Brussels-based American MNE’s [multinational enterprises] believed that theywere disadvantaged with their European counterparts because they did not havea ‘patron’, a member government with which they could work on Europeanmatters. The American companies realized that if they wished to influenceEuropean policy, they would have to do so at the supranational level.

This logic applies to US, Japanese and Korean firms producing for globalmarkets, including the common market of the EU. It applies with increasingforce to firms from countries neighbouring the EU, from member states of theEuropean Free Trade Association (EFTA) with very strong trade links to EUcountries and from within the European Economic Area (EEA) that operateprimarily within a common European market but are without governmentpatronage at the EU level. For example, Telenor, the Norwegian mobile tele-communications operator, has operations in three EU countries (Denmark,Hungary and Sweden). But more importantly, owing to Norway’s EEAmembership, even Telenor’s operations in Norway take place within a singleEuropean market in telecommunications that is shaped by policies made inBrussels. Unlike its competitors from EU member states, however, Telenor’shome country does not supply any Members of the European Parliament, EU Commissioners or Commission staff and the company cannot lobby itshome-country government to influence EU policy-making in the Council ofMinisters.

The second institutional factor that may affect the decision to lobby inthe EU is the extent to which business actors and other special interests areincluded in national policy-making processes (Mahoney and Baumgartner,2008). This factor points to a role for national differences in systems of interestintermediation (Olson, 1982; Schmitter and Lehmbruch, 1979). Systems ofinterest intermediation possess multiple dimensions reflecting both interestgroup and policy process characteristics. These systems are described as morecorporatist (e.g. Austria, Sweden and Germany) or more pluralist (e.g. theUSA, the UK and Australia). Firms embedded in highly corporatist systemswill rely on more encompassing groups to represent their interests in the EUand will be less likely to have the institutionalized capacity to lobby on theirown. Grant (1993: 15) noted that, in comparison with the USA and the UK,where firms have developed government relations offices, ‘[g]overnment

European Union Politics 10(2)1 5 8

relations divisions are relatively unknown in Germany’. In contrast, firmsfrom pluralist systems that do not have the associational representationopportunities of corporatist systems and that have developed the institutionalcapacity and experience to represent their own interests domestically will besimilarly active in the European policy arena. According to Greenwood (2007:19), ‘Anglo and American firms in particular, familiar with operating inpluralist environments, are used to operating outside of groups . . . whereasthose used to the corporatist traditions of Germanic countries tend to placegreater emphasis upon associations’. Similarly, Woll (2006: 463) contrasts‘direct representation’ in the USA with the organization of interest represen-tation in the EU in terms of ‘national and sectoral peak organizations, whichtend to form European platforms’, while noting that in the EU there is‘recently also direct representation’. However, recent evidence from quanti-tative studies suggests more tempered expectations concerning the lastingimpact of traditional modes of interest intermediation (Eising, 2007; Schneider et al., 2007).

What do these arguments imply for direct firm lobbying in the EU? TheEU is indeed sufficiently important to attract lobbying from firms head-quartered both inside and outside the EU: Its institutions legislate on theterms under which goods and services can be produced and traded in whatis, if considered as a single unit, the largest economy in the world. As a result,many businesses bear the costs or obtain the benefits of EU policies (Majone,1996). But firms have neither equal resources nor equal incentives to partici-pate politically, particularly if that participation takes place beyond nationalborders. To begin with, large firms with sufficient resources, a stake in thepolicy issue and the size to attract the attention of regulators will be morelikely to lobby (Boies, 1989; Grier et al., 1994). This leads to a straightforwardhypothesis about the relationship between firm size and EU lobbying:

H1: The likelihood of direct lobbying increases with firm size.

Next, firms’ efforts to influence government decisions are a consequenceof the level of government involvement through its use of coercive powersand through its distribution of resources in their operations and industry(Wilson, 2003). Government involvement can take the form of regulation,subsidies or procurement. Of these, regulation is by far the most importantmode of EU involvement in firms’ operations. Fligstein and Stone Sweet(2002) have found that interest group formation in the EU is indeed drivenby legislative and regulatory activity. But the area of subsidies is also highlyrelevant. First, EU regulation on state aid directly affects the ability of firmsto obtain subsidies from national governments. Second, firms are significantrecipients of research and development funds under the EU’s ‘Framework

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 5 9

programmes’ (Hix, 2005: 296). Crucially for our concerns, exposure to govern-ment action varies across firms and industries (Coen, 1997). Thus, a secondhypothesis states:

H2: The likelihood of direct lobbying increases with government involvement ina firm’s operations.

The standard profit-seeking argument further suggests that firms willdecide to participate politically under either of two conditions: First, they willparticipate when government policies have a specific private effect rather thanan industry- or business-wide public effect. Alternatively, they will partici-pate politically to secure a public or collective good when a firm is sufficientlylarge, or the industry sufficiently small, that the firm gets ‘such a large fractionof the total benefit that they find it worthwhile to see the collective good isprovided, even if they have to pay the entire cost’ (Olson, 1965: 46). Thesefactors are commonly assumed to be reflected in indicators of market struc-ture such as industry concentration (Esty and Caves, 1983; Zardkoohi, 1985,1988). Although measures of market structure have produced mixed resultsin empirical applications and are subjected to continued criticism (Brasherand Lowery, 2006), our baseline model follows convention and includes ameasure of market concentration (Grier et al., 1994; Schuler et al., 2002):

H3: The likelihood of direct lobbying increases with the degree of industryconcentration.

Beyond these standard predictors of corporate lobbying in any politicalsystem, we expect that firms with the resources and incentives to lobby willadjust tactically to the particular opportunities for representing interestsoffered by policy arenas. In the EU institutional context, the firm-level propen-sity to lobby is likely to be linked to two distinct dimensions of the firm’shome country: whether or not the country is an EU member; and the country’smode of interest group intermediation (Olson, 1982). The first dimensionsuggests a simple adaptation of the profit-seeking model to the differentialavailability of government patrons and, to develop the argument one stepfurther, to the strength of the patron. Despite an increasing supranationaliz-ation of EU policy-making through co-decision procedures and qualifiedmajority voting, following the national route through their home countries’governments and the Council of Ministers remains an important option forbusiness actors (Bennett, 1999). In the context of the European End of LifeAutomobile Directive, for example, much business lobbying was channelledthrough national governments. A more recent example is the GermanChancellor’s intervention on behalf of her country’s car manufacturers

European Union Politics 10(2)1 6 0

against tighter EU greenhouse gas emissions from vehicles. In this view, firmsfrom EU member states enlist national governments to represent theirinterests in EU policy more effectively than do firms from non-EU membercountries. Other things equal, companies operating in EU markets butwithout the option to pursue interest representation through governmentpatrons with a formal presence in EU decision-making bodies will be par-ticularly active in the EU policy arena to compensate for the lack of a memberstate patron. Therefore, we expect the availability of interest representationthrough national channels to affect a firm’s political tactics and in this waymodify the standard model to account for lobbying in the EU. For those firmsthat do have a member state patron, a further consideration is that patronsdo not have equal influence in EU policy-making procedures and nego-tiations. There are numerous dimensions affecting the influence of EUmember states; one important dimension is the political weight accorded tothem in EU policy-making bodies. This argument yields a weak patronagehypothesis as suggested by the literature and reflecting the availability or notof a government patron. In addition, a strong patronage hypothesis capturesdifferences in the institutional strength of the patron:

H4a: The likelihood of direct lobbying increases for companies with no memberstate patron.

H4b: The likelihood of direct lobbying varies inversely with the institutionalpower of the member state patron.

The second home-country dimension that might affect lobbying choicesconcerns the system of interest group intermediation. Here, we follow theexpectations formulated by Schmidt (1999) and Cowles (2001). These authorssuggest that interest groups from pluralist contexts adapt more easily to EU-level interest representation than do groups that have been socialized in moreintegrated politico-economic systems. Accordingly, we expect that firms froma pluralist context are more likely to lobby at the EU level than are those froma corporatist context. Thus:

H5: The likelihood of direct lobbying varies inversely with the level of politico-economic integration or corporatism in the firm’s home country.

Furthermore, firm lobbying is likely to be affected by other actors andcountervailing interests – traditionally organized labour and consumerinterests, but more recently environmental groups. In corporatist systems,unions enjoy a permanent seat at the bargaining table. To the extent that thestrength of labour is associated with corporatism, this suggests a counterhypothesis to H5. In countries with strong and institutionally empoweredcountervailing interests, business interests have an incentive to shift policy

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 6 1

debates away from the national level (Hix, 2005: 265). Furthermore, a strongdomestic influence of trade unions and green parties might reduce thewillingness and ability of governments to represent business interests at theEU level; this might thereby increase firm incentives to become directly politi-cally active here. Thus, the strength of countervailing interests suggests a logicof venue shopping, according to which actors try to shift issues to morefavourably disposed bureaucracies and policy-makers (Baumgartner andJones, 1993). It follows that firms from countries with strong countervailinginterests, including labour unions and green parties, are more likely to lobbyat the EU level:

H6a: The likelihood of direct lobbying increases with the strength of labour unionsin a firm’s home country.

H6b: The likelihood of direct lobbying increases with the strength of green partiesin a firm’s home country.

Finally, a number of factors should be controlled for that are likely toinfluence firms’ decisions about individual political action at the EU level.Following standard practice, we include firms’ profits to control for the effectsof performance on political behaviour (Grier et al., 1994). Moreover, decisionsabout firm-level political action take place in the context of collective political representation through employer organizations, trade and industryassociations and their European federations (Grant, 1993; Greenwood, 2002).Whether the relationship between collective action through organizations anddirect political activity by firms is thought of as one of substitutes or ofcomplements, the model should control for associational activity in Brussels.We also allow for the influence of time and experience, expecting that firmsare more likely to be politically established in Brussels the longer their homecountry has been a member of the EC or EU.3

Data and measurement

Our data set contains information on 2000 transnational firms from varioushome-country political contexts and their choices to engage in direct politi-cal action in the EU. The sample is drawn from Forbes Global 2000. Thesefirms are the largest in the world, representing 50 countries and 27 industrialsectors. A firm’s size is indicated by sales, assets or market value; inclusionamong the largest 2000 firms is based on a composite ranking of all three indi-cators as well as profits. The industrial sector is complicated by corporationsthat are active in more than one sector. For this analysis, their designatedprimary sector of activity was used. The practice of using large firm samples

European Union Politics 10(2)1 6 2

has recently received important critical attention. Brasher and Lowery (2006)argue that many of the mixed and uncertain findings in the literature mightbe a function of limited variance on key independent variables arising fromthe use of restrictive samples of corporations. The solution to this caveat isto bring multiple research designs to bear on a research problem. ‘The ForbesGlobal 2000’ list of companies is a useful place to start the systematic investi-gation of EU direct lobbying for three main reasons: First, the firms in thesample are important transnational actors, and analysing their politicalactivities at the EU level is in itself a worthwhile endeavour. Second,although the firms are all very large, they nevertheless represent a broad sizerange, encompassing annual sales figures from about US$10 million toUS$256 billion, as well as displaying wide variation on measures of govern-ment involvement and home-country context. Third, given the observeddrop-off in EU-level lobbying as firm size decreases, an extension of thesample to encompass smaller firms would very quickly turn lobbying intoa rare event.

Three dichotomous measures of direct firm lobbying are available: whethera firm has a European Affairs representative; whether a representative has an office in Brussels; and whether a representative has obtained theaccreditation required to enter the premises of the European Parliament (EP).Although the Commission and the Council of Ministers maintain the pre-eminent policy-making positions at the European level, the EP has gained in importance since the introduction of co-decision procedures with theMaastricht Treaty and so it is also important to be able to disaggregatelobbying activity by institutional focus. The different lobbying measuresprovide information on firms’ institutional focus within the EU system andalso on the willingness of firms to commit to different types of represen-tational engagement. Registering as an EP lobbyist is a relatively low-costactivity and its use is restricted to the EP. By contrast, setting up a EuropeanAffairs post is more costly while being potentially useful for targeting all three major policy-making bodies: the Commission, the Council of Ministersand the EP. Lastly, equipping this representative with his or her own officein Brussels is more costly still, but a Brussels base is useful for firms seekingto play a role in European public affairs. According to Greenwood (2007: 13),around 85% of all EU-level groups are ‘located within a 2 1/2 hour train ridefrom Brussels’. Although these measures of the dependent variable capturethe more instrumental forms of corporate political activity, they do not repre-sent all such activity. For example, hired external lobbyists and less instru-mental efforts to influence mass and elite perceptions of the corporation or apolicy issue are not included in this analysis. Thus, the measures used hereunderestimate the actual level of corporate political activity.

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 6 3

The independent variables include firm size as measured by sales. In theanalysis below, we use the natural log to account for diminishing marginaleffects and to improve model fit. Alternative measures of firm size are assets,market value and a composite measure incorporating all three components.The main results reported in this article are unaffected by the type of measure-ment chosen.

Two major routes are identified in the policy and regulation literature bywhich policy-making affects private interests: the courts and regulatoryagencies (Noll, 1985). Firms subject to such regulatory enforcement have anincentive to influence the formulation of the policies on which regulation isbased through lobbying. For example, Microsoft has been the target of regu-latory action and expensive litigation in both the USA and the EU and hassince mobilized for political activity in both policy arenas. The corporationnow has a full-time European Public Affairs representative and is registeredas a lobbyist at the EP. To capture a firm’s exposure to EU regulation, we useEuropean court cases and appearance in the regulatory proceedings of theCommission. The first indicator counts the number of times a firm ismentioned in cases before the European Court of Justice (ECJ) and the Courtof the First Instance (CFI) for the period 2000–2005, aggregated at the industrylevel. These court cases are applications of the EU regulatory regime. Theyconcern issues as diverse as intellectual property rights, state aid, mergers,cartels and competition, as well as freedom of movement and trade. Courtlistings are likely to be somewhat endogenous to corporate political actionbecause politically active firms may take, as well as be the target of, legalaction in matters of EU regulation. Yet, in contrast to the USA, where interestgroups can use the court system directly to affect legal change or supportother parties by filing amicus curiae briefs, the ECJ is less of a venue for specialinterest politics (Mahoney and Baumgartner, 2008).

The second measure of EU involvement counts the number of timesduring the same period a firm is named in the regulatory proceedings anddecisions of the Commission, again aggregated at the level of industries. Toobtain an overall regulation measure, we use industry percentages of totalcourt and Commission listings. The combined indicator allows for firms inindustries highly exposed to EU regulatory activity that anticipate beingtargets of or parties to such activity and not just firms already targeted. Themeasure thus captures the ecological effect of EU regulation on a firm’soperations.

Regulatory exposure scores range from 0.01 for Health Care Equipmentand Services to 0.18 for Household and Personal Products. After Householdand Personal Products, the most heavily regulated industries are Chemicals,Conglomerates, Drugs and Biotechnology and Aerospace and Defence. These

European Union Politics 10(2)1 6 4

sectors are exposed not only to the EU’s competition, state aid and mergercontrol regimes, but also through European technology, environmental,consumer protection and social policy (Hix, 2005: 235–70; Stone Sweet et al.,2001). Highly specialized knowledge and high stakes in the policy processprovide firms in, for instance, the biotechnology sector with particular incen-tives for direct lobbying (Schneider, 2006: 118–9). Lastly, the firms in thesesectors benefit significantly from EU Research and Development expenditureunder the EU’s ‘Framework programmes’ (Hix, 2005: 296). A full table ofregulatory exposure scores is provided in the Online Appendix 1.

Next, we require an indicator of market concentration to capture the extentto which collective action problems counteract firms’ incentives to take politi-cal action at the European level. Following standard practice in the literatureon corporate political action, such an indicator is obtained by calculating theshare of the top four firms in the combined sales for each sector. Collectiveinterest representation is controlled for at the industry level by the numberof trade, industry or employers’ Euro groups per sector (associations perindustry).

At the country level, two measures of national patronage are employed:First, we expect companies from outside the EU to compensate for the absenceof member government representation by developing their own lobbyingcapability. This concerns Japanese and US firms but above all firms from EFTA and EEA countries.4 Second, the strength of national patronage enjoyedby EU firms is represented by the number of a country’s votes in the Councilof Ministers. These institutional voting rights are broadly reflective ofcountries’ size and population. Moreover, other variables such as differentpolitico-economic traditions may affect the extent to which these institutionalrights are translated into effective patronage. Here, we are interested in theextent to which larger countries may have a greater capacity to see to theirconstituents’ interests because they have greater decision-making rights in theCouncil. For corporatist patterns of interest representation, we use Siaroff’s(1999) scale of politico-economic integration. There are others available butSiaroff’s scale improves on previous measures of the concept by combiningthe main dimensions of the pluralism–corporatism contrast (Lijphart, 1999:176). Scores range from 1.875 for Canada as the most pluralist system to 4.625for Austria, Norway and Sweden, the most integrated systems. The strengthof the labour movement is indicated by labour union density, or percentage ofthe workforce organized. Green party support is measured as green party voteshare averaged over the last two elections prior to December 2005. Finally,collective interest representation is controlled for at the country level by thenumber of national trade or industry associations represented in Brussels(national associations).5

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 6 5

Analysis

Because these are new data, we begin with a descriptive overview of firm-level lobbying in the EU. Of the 2009 firms in the data set, just under 10%have a European Affairs representative or registered lobbyist status with theEP and 7.5% have their own office in Brussels.6 If the focus is narrowed tothe 479 firms headquartered in the EU, these percentages increase to 23% forEP lobbyist status, 22% for European Affairs representative and 16% forBrussels office, respectively. These data suggest that among large firms thatare politically active there is a recognition of the EP as well as the Commissionas an important policy-making institution. Figure 1 ranks the top 10 countriesby their average scores on the three lobbying indicators. Approximately one-third of all accredited lobbyists and European Affairs representatives,respectively, are from US firms. The next-largest source countries are the bigEU economies: France, Germany, the UK, Italy and the Netherlands. Apartfrom the USA, two more non-EU countries – Japan and Switzerland – are wellrepresented. Outside the top 10 countries, the number of firms with direct EUlobbying capacities drops rapidly.

European Union Politics 10(2)1 6 6

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Figure 1 Number of firms lobbying EU policy-makers (top ten countries).

These distributions, in particular the strong presence of US firms, seembroadly consistent with the earlier research on EU interest representation (e.g.Greenwood, 2007). Yet, if the number of a country’s firms among the world’s2000 largest is controlled for, the results are quite surprising. This is shownin Figure 2, which ranks the top 10 countries by the percentages of firms in thedata set that lobby at the EU level. In this perspective, the USA no longerappears among the top 10 as less than 8% of the US companies in our samplelobby the Parliament and less than 7% maintain an office in Brussels. Follow-ing the literature on EU lobbying, one might also have expected substantiallymore than 8% of British firms to have an office in Brussels. In contrast, French,Dutch, Italian and German firms seem disproportionately active, with 27%,26%, 29% and 23%, respectively, of these firms having a Brussels office.Although this finding is at odds with much of the earlier literature, whichplaced an emphasis on US and UK direct lobbying, Coen’s (1998) survey oflarge firms picked up on this development in the 1990s and noted that Frenchfirms were second only to US firms with Brussels offices. Coen (1998: 89)attributes an important role to the national business association: ‘the [ConseilNational du Patronat Français] proactively set about encouraging firms to

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 6 7

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Figure 2 Percentage of firms lobbying EU policy-makers (top ten countries).

locate political affairs offices in Brussels’. Of German firms, Coen observedthat the largest ‘have almost all established some form of Brussels represen-tation and have recognized the merits of Anglo-Saxon style direct lobbyingof the European Commission’ (Coen, 1998: 93).

Given our theoretical expectations, the most interesting findings at thebivariate level are the positions of Norwegian and Swiss firms in Figure 2.The fact that these countries rank well ahead of EU members such as Austriaor the UK lends support to the weak patronage hypothesis (H4a).

Generally, firms that have a European Affairs representative also tend tohave an office in Brussels and/or lobby the EP. Of firms with a EuropeanAffairs representative, 78% also have a Brussels office and 58% of them havelobbyist status with the EP. Indeed, the three measures of EU lobbying arehighly correlated: European Affairs representative, Brussels office = .87 (p < .000); European Affairs representative, EP lobbyist = .55 (p < .000); and Brussels office, EP lobbyist = .59 (p < .000). The strength of the associ-ation varies somewhat among countries but this variation is not related toour theoretical expectations concerning EU lobbying. In particular, there is nonotable difference between firms from EU countries and those from outsidethe EU. But whereas the relatively low-cost activity of registering as a lobbyistwith the EP is characterized by considerable fluctuation (Berkhout andLowery, 2008: 507), the establishment of an office is a longer-term investment,thus adding confidence to generalizations. Therefore, for the multivariateanalysis, we use only the establishment of a Brussels office as our measure ofpolitical activity.7

The multivariate analysis proceeds by first estimating a parsimoniousmodel of firm- and industry-level variables that is similar to the profit-seekingmodels in the US literature. We then add a set of contextual variables at thecountry level. As firms are nested within countries, robust variance estimatesare obtained to correct for clustering.8 Table 1 shows logit estimates of thedeterminants of EU lobbying for firms from within the EU. Firm size and regu-latory exposure show the hypothesized effects on firms’ lobbying propensity.This parsimonious model fits the data quite well (pseudo-R2 = .32) and themodel correctly predicts 85.4% of all cases.9 This result is consistent with theempirical findings of the earlier research on lobbying in Washington DC.

Adding the contextual variables at the country level (column 3) showsthat national modes of interest intermediation do not influence firms’decisions to lobby. Differences in the strength of member state patronage asmeasured by home government’s votes in the Council of Ministers also failto exert a significant effect.10 Neither labour union density nor green partystrength in firms’ country of origin are significant. In fact, the only country-level variable that significantly affects firms’ lobbying propensity is the

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strength of nationally defined associational representation. Unlike sectoralassociations, national associations exert a significant negative effect on directfirm lobbying, suggesting that firms compensate for weak associational repre-sentation along national lines by more direct political action.

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 6 9

Table 1 Logit estimates of determinants of direct firm lobbying in the EU

EU firms All firms

Firm characteristicsln Sales 1.47 1.51 1.38 1.35

(0.21)** (0.26)** (0.15)** (0.14)**Profits –0.00 0.01 0.00 0.03

(0.03) (0.04) (0.03) (0.03)

Industry characteristicsRegulatory exposure 10.52 10.60 10.52 10.60

(2.73)** (3.45)** (2.73)** (3.45)**Concentration 0.54 1.42 0.54 1.42

(1.70) (2.15) (1.70) (2.15)Associations per industry 0.14 0.21 0.14 0.21

(0.14) (0.16) (0.14) (0.16)

Country characteristicsCorporatism 1.47 –0.15

(0.90) (0.18)Green party support 0.10 0.14

(0.16) (0.08)Union density 0.00 0.01

(0.01) (0.01)Council of Ministers votes 0.17

(0.13)National associations –0.35 –0.06

(0.16)* (0.02)**EU membership length 0.03

(0.02)EU membership 0.99

(0.37)**Constant –6.47 –15.31 –6.67 –7.40

(1.20)** (5.82)** (0.56)** (0.59)**Observations 478 471 2004 1678Log pseudo-likelihood –143.42 –133.76 –368.57 –319.63Pseudo-R 2 .32 .36 .31 .36Chi-square 65.54** 726.75** 226.19** 1868.58**% correctly classified 85.4 85.6 92.5 91.5

Note: Robust standard errors in parentheses; * p < .05; ** p < .01

To gain a sense of the magnitude of the causal effects, we computed thechange in the expected probability of lobbying as firm size and regulatoryexposure change from the minimum to maximum observed value, holding allother variables at their mean (discrete change). Size has the most substantialeffect. An increase in size from the smallest to the largest firm substantiallyincreases the probability of having a Brussels office by .94 (.93 if the set ofcountry-level variables is included in the model). Moving from the lowest tothe highest level of regulatory exposure increases the probability of lobbyingby .17 (.14 with country-level variables).

The last two models presented in Table 1 show the results of extendingthe analysis to all 2009 firms in the sample. Despite their large size, some ofthese firms may not trade in the EU and constitute irrelevant cases. Nonethe-less, the similarity of the results is striking. The variables that significantlyinfluence direct lobbying by EU firms exert the same effects for the globalsample. Firm size and regulatory exposure are positively associated withlobbying, suggesting that firms adjust their political behaviour tactically tothe multi-level nature of EU lobbying. As with the analysis of EU firms only,adding further contextual and institutional variables – whether types ofinterest intermediation or countervailing power – to the parsimonious set offirm- and industry-level predictors does little to improve the fit or predictivepower of the model. EU membership and nationally defined associationalrepresentation in Brussels are the only country-level variables to affect thedecision to lobby directly. The positive coefficient for EU membership reflectsthe fact that EU firms are much more likely to be commercially active in theEU. Some non-European firms will have no commercial interest in the EU.Finally, the firm- and industry-level variables are not highly correlated withthe country-level variables, adding confidence to these findings (see Online Appendix 3).

Again, we computed the discrete change for firm size and regulatoryexposure. An increase in size from the smallest to the largest firm sub-stantially increases the probability of having a Brussels office by .86 (.83 if theset of country-level variables is included in the model). Moving from thelowest to the highest level of regulatory exposure increases the probability oflobbying by .10 (both with and without country-level variables controlled for).

Discussion

We began the analysis by asking whether the factors that influence politicalactivity in Washington prompt firms to become politically active at the EU level. Do large corporations pursue similar tactics regardless of their

European Union Politics 10(2)1 7 0

political origins, as suggested by the standard profit-seeking model of thefirm? Our findings support this model. It is firm size and involvement withgovernment that account for direct firm lobbying of EU policy-makers. Evenwhen looking at a sample of the largest corporations in the world and withconsiderable diversity of national background and industrial sector, firmsbecome significantly more likely to take up political activity in Brussels thebigger they are. Furthermore, sectoral exposure to supranational EU policy-making increases the likelihood of lobbying. These results support Eising’s(2007) finding that EU regulation provides a major incentive for businessassociations to intensify their lobbying efforts at the EU level. Our results alsolend support to the weak national patronage hypothesis. Embedded inEuropean markets but without a government patron to advance their interests in the EU institutions, firms from the EEA and EFTA countries thatare not EU members at the same time – Norway most notably – are likely todevelop their own lobbying capabilities in Brussels.

We further explored country differences using the dominant character-ization of patterns of interest intermediation at the national level. Althoughlikely to be most applicable to economic interests, these patterns turn out tobe largely irrelevant to corporate lobbying in the EU. Contrary to corporatisttheory, the impact of national patterns of interest intermediation is notsupported by the firm-level practice of political activity in the EU. Thus,Eising’s (2007) finding for business associations that differences amonggroups from statist, pluralistic and corporatist countries matter little for accessto EU institutions extends to the area of direct firm lobbying. We also findthat country differences in the strength of countervailing interests – the levelof political support for green parties and the strength of the labour movement– do not help us understand firms’ decisions to engage in political activity inBrussels. Business community traditions and the institutional capacities offirms that led to expectations in the earlier research that UK firms belong ina category with US firms and would be more active than, for example, Frenchor German firms are also not supported by the data. As the standard profit-seeking model would suggest, whether or not continental European firms hadtraditionally neglected independent political activity and relied on represen-tation through associations or national governments, they now behave likeother large firms from other countries. In fact, the significant negative effectof national associations on direct firm lobbying suggests a logic of replace-ment, according to which firms compensate for weak associational represen-tation along national lines by more direct political action. At least with this form of corporate political activity, conventional understandings ofdifferences in national practice no longer help differentiate those firms thatare likely to lobby the European policy-makers.

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 7 1

Commenting on capitalism’s cosmopolitan character and homogenizingforce in the middle of the 19th century, Marx and Engels (1848/2002: 223)claimed that the bourgeoisie ‘has drawn from under the feet of industry thenational ground on which it stood’. It is a testable claim. Supporting a moregeneral model of firm political behaviour rather than enduring national differ-ences, the results reported here confirm that statement for the case of directcorporate lobbying. With this most instrumental form of political activity inthe European policy-making arena, large firms and firms affected by EUpolicy-making tactically adapt to the multi-level nature of the policy-makingprocess and seek independent representation. There are, of course, manyother dimensions to special interest politics and different types of politicalactivity to investigate. Direct comparisons of interest representation acrosspolicy arenas are an important further development. In examining lobbyingsuccess in the USA and the EU with interview data, Mahoney (2008: 189–93)finds that, although business interests do well in both settings, the US systemfavours more winner-take-all outcomes whereas the EU produces morecompromised outcomes, suggesting that the EU’s reduced democraticaccountability might facilitate the negotiation of compromise. Similarcapacities for accommodating diverse interests have been attributed tocorporatist systems of interest intermediation at the national level. Thepresent article has shown that at the level of the EU such differences no longermatter where business interests are concerned. Lastly, as with research oncorporate political activity in other policy-making contexts, it is important toconsider how to include other actors in the analysis in order to improve ourunderstanding of the biases in the interest representation system as a wholeand to begin to link these analyses to the question of influence.

Notes

Earlier versions of this article were presented at the Midwest Political ScienceAssociation 64th Annual National Conference in Chicago, 20–23 April 2006, andthe University of Essex Department of Government Seminar, 9 May 2006. We thankJos Elkink, Wyn Grant, Richard Jankowski and Cornelia Woll, the participants atthe ESRC Workshop ‘Organized Interests and Democratic Governance’, New-castle, 25–26 January 2007, as well as four anonymous reviewers for EUP for veryhelpful comments. The data set and do-file for the empirical analysis in this articleas well as the web-appendices can be found at http://eup.sagepub.com/supplemental and at http://www.abdn.ac.uk/~pol209/data.htm.

1 See the special issues ‘Empirical and Theoretical Studies in EU Lobbying’ ofthe Journal of European Public Policy (14(3)) and on interest group influence inthe Journal of Public Policy (27(1)).

European Union Politics 10(2)1 7 2

2 Mahoney’s (2008) analysis includes nine corporations in the US (out of 65lobbyists) and four firms in the EU data (out of 82 advocates), but the EUfirms are excluded from much of the analysis. Likewise, Eising (2007)excludes the 34 firms in his data set from most analyses.

3 A firm’s degree of transnationality may influence nationally specific behav-iour. A firm active in several countries might be less likely to be influencedby the characteristics of a specific country. No comparative data for the 2000firms in the data set are currently available on transnationality. However, weran our analyses with a control variable for the openness of a firm’s homeeconomy. This variable was not significant in any model and its presence orabsence did not affect the performance of other variables in the model; inparticular, it did not contribute to explaining why most country-levelvariables are not significant.

4 EEA countries that are not EU members at the same time are Iceland,Liechtenstein and Norway. Because the sample does not contain firms fromthe first two countries, the number of EEA firms is identical to the group ofNorwegian firms. The only remaining (non-EEA, non-EU) EFTA country isSwitzerland, which has adopted many aspects of the European internalmarket by means of bilateral agreements with the EU.

5 Coding and data sources for all variables as well as summary statistics of all variables used in the multivariate analysis are provided in OnlineAppendix 2.

6 Nine of the Global 2000 firms (BHP Billiton, Brambles Group, Carnival Corp,Eurotunnel, Investec, Reed Elsevier, Rio Tinto, Royal Dutch/Shell Group andUnilever) are listed with headquarters in two countries. These firms appeartwice in the data set.

7 The results reported in the analysis below are broadly robust to the choice of measurement of EU lobbying as European Affairs representative, EPaccreditation or Brussels office. Results from these alternative estimations areavailable from the authors’ website at http://www.abdn.ac.uk/~pol209/data.htm.

8 The inclusion of market concentration and associational density as industry-level variables in our models may not fully remove the problems associatedwith the interdependence between observations within industries. In thissituation, fixed-effects modelling for one group (industry) combined withcluster-robust variance estimation for the other (countries) is an appropriatemethod of dealing with the multi-level structure of the data (Steenbergen andJones, 2002). Thus, we replicated the models reported in Table 1 with addedcontrols for industry effects in the form of a comprehensive set of sectordummies. The effects of firm size and government involvement remain robustto estimation with fixed industry effects. We also assessed the robustness ofthese findings to the method of estimating firm-, industry- and country-leveleffects by replicating the models in Table 1, firstly, using fixed country insteadof industry effects and applying the robust variance estimator to correct forclustering on industries and, secondly, by including all industry and countrydummies. Again, the firm- and industry-level estimates hold up to theseprocedures. The full results are available from the authors’ website athttp://www.abdn.ac.uk/~pol209/data.htm.

Bernhagen and Mitchell The Determinants of Direct Corporate Lobbying 1 7 3

9 Because the two classes of the dependent variable are quite unbalanced, thespecified value for determining whether an observation has a predictedpositive outcome or not has been set to reflect the observed share of positiveoutcomes, as opposed to the default value of .5 (see Cramer, 1999).

10 If Norway – the only non-EU EEA country – is included as a dummy variablein the multivariate models, we find a positive and significant effect onlobbying; however, we recognize that this is a crude test of the weak hypoth-esis for patronage.

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About the authors

Patrick Bernhagen is a Lecturer in Politics and International Relations,University of Aberdeen, Department of Politics and InternationalRelations, Edward Wright Building, Dunbar Street, Aberdeen, AB243QY, United Kingdom.Fax: +44 1224 27 2552E-mail: p.bernhagen@abdn.ac.uk

Neil J. Mitchell is Chair in Politics and International Relations,University of Aberdeen, Department of Politics and InternationalRelations, Edward Wright Building, Dunbar Street, Aberdeen, AB243QY, United Kingdom.Fax: +44 1224 27 2552E-mail: n.mitchell@abdn.ac.uk

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