Question

Explain how firms can develop political capabilities? Discuss reasons for regulation and the potential costs associated with them?

Answer 1

Political capability for the firm means that firms can utilise political resources to influence changes in corporate environment to suit its capabilties. Firms political capability development depends a lot on the firms dealing with political uncertainity for its business and to have more sustainable business environment. This happens when products or service are high values but are sold in an environment of uncertainity.

For example US weapon market. Firms dealing with weapon and warfare aircrafts exchange have large political capabilities so as to sell their products in other countries. without government consent, these firms cannot deal and sell to foreign nations due to regulations. As US government is the main buyer for these weapon suppliers, there are regulations for selling the same products to other countries. Thus political lobbying is done to even go for one single order where order values are very high and in billions of dollars.