When firms engage in lobbying, the primary outcome they seek is beneficial regulatory change. However, prior literature suggests that there may also be a secondary outcome to lobbying—the leakage of knowledge to competitors. In this paper, I explore the leakage of technological knowledge when firms lobby for technology-related regulations and the strategic response of competitors to the leakage. Based on field interviews and existing studies, I hypothesize that when a firm is involved in lobbying, competitors are able to learn about the lobbying firm’s technologies through the lobbyists and policies for which the firm advocates. In addition, I abductively explore whether leakage is more likely with external or internal lobbyists. I build a unique dataset on U.S. firms that engaged in lobbying on technology policy and the patents applied for by those firms. I utilize an embedding approach on the text of patents to directly detect knowledge leakage in the strategic response of competitors. The results show that when a firm increase lobbying efforts, its patents are associated with a greater number of imitative patents generated by competitors. Moreover, post-hoc analyses suggest that internal lobbying is closely linked to leakage because firm employees posses and share detailed information, but there is no evidence that external lobbyists opportunistically leak. Overall, this paper documents a technological risk inherent to coordinating a firm’s innovation activity with its political strategy.
Contact person: Daehyun Kim
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