Adam R. Fremeth

• Fremeth, A.; Holburn, G. L. F.; Piazza, A., 2022, "Activist Protest Spillovers into the Regulatory Domain: Theory and Evidence from the U.S. Nuclear Power Generation Industry", Organization Science, May 33(3): 1163 - 1187.
  Abstract: We examine how social activism—in the form of public protests against contentious business practices—can spill over into the regulatory domain, extending beyond activists’ articulated goals to affect firms’ regulatory outcomes in areas that are not directly targeted. We argue that firms are likely to experience broader regulatory repercussions after activist protests because public contention invites greater scrutiny of firm behavior by industry regulators, increasing the likelihood that instances of organizational non-compliance will be discovered. Protests can also cause regulators to evaluate targeted firms more negatively in regulatory assessments, especially firms with less favorable pre-existing reputations or stakeholder relations, and to tighten regulations on non-targeted issues that signal their commitment to safeguarding the public interest. We further contend that the political context within which regulatory agencies operate shapes the extent of protest spillovers: when political institutions are aligned with activist goals, and when regulators are ideologically sympathetic too, protests have a more pronounced negative impact on firms’ regulatory outcomes in non-targeted domains. We find robust support for our predictions in a statistical analysis of the impact of anti-nuclear protests – which sought to block nuclear power plant development by electric utilities – on utilities’ subsequent regulated financial rates of return on their assets. Our analysis contributes new insights to research on the indirect consequences for targeted organizations of social activism.

  Link(s) to publication:

  https://pubsonline.informs.org/doi/full/10.1287/orsc.2021.1473

  http://dx.doi.org/10.1287/orsc.2021.1473

• Fremeth, A.; Holburn, G. L. F., 2020, "The Impact of Political Directors on Corporate Strategy for Government-Owned Utilities: Evidence from Ontario's Electricity Distribution Sector", Energy Policy, August 143
  Abstract: We contribute to research on governance of state-owned electric utilities by examining the implications of oversight by independent versus ‘political’ directors for corporate strategy. While policy think-tanks often recommend that governments appoint independent professional directors to boards of state-owned corporations, governments sometimes select politicians who bring a politically-oriented perspective to their oversight duties. To examine the potential strategic consequences, we draw on a novel survey of 384 directors of municipally-owned local electricity distribution companies in Canada, of which about a third were elected municipal councillors and the remaining were independent business professionals. The survey solicited individual director views about strategic priorities, including mergers and acquisitions, business diversification, and corporate financing options. Our statistical analysis of the survey response data finds that political directors, after controlling for prior executive experience and organizational context, were more risk-tolerant on average than independent directors, as evidenced by a greater willingness to diversify into unregulated business activities and to acquire equity stakes in other utilities; but at the same time, they prioritized enhanced dividend payments to the municipal government over re-investment in the corporation, a potential constraint on future business growth.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.enpol.2020.111529

• Fremeth, A.; Richter, B. K.; Schaufele, B., 2018, "Spillovers from Regulating Corporate Campaign Contributions", Journal of Regulatory Economics, December 54(3): 244 - 265.
  Abstract: Populist clamor and recent Supreme Court decisions have renewed calls for increased regulation of corporate money in politics. Few empirical estimates exist, however, on the implications of existing rules on firms' political spending. Exploiting within firm-cycle cross-candidate variation and across firm-cycle variation, we demonstrate that the regulation of PAC campaign contributions generates large spillovers into other corporate political expenditures such as lobbying. Using both high dimensional fixed effects and regression discontinuity designs, we demonstrate that firms constrained by campaign contribution limits spend between $549,000 and $1.6M more on lobbying per election cycle, an amount that is more than 100 times the campaign contribution limit. These results demonstrate that, similar to regulations in other domains of the economy, constraining specific corporate political activities often yields unintended effects.

  Link(s) to publication:

  http://dx.doi.org/10.1007/s11149-018-9369-7

• Islam, M.; Fremeth, A.; Marcus, A. A., 2018, "Signaling by Early Stage Startups: US Government Research Grants and Venture Capital Funding", Journal of Business Venturing, January 33(1): 35 - 51.
  Abstract: Entrepreneurship researchers have documented that early stage startups rely on signals to demonstrate the transitions in their identities that they must make when they cross organizational life cycle thresholds. However, early stage startups in emerging industry contexts tend to have few good signals upon which to rely. Public agencies can play a valuable role in this process, but prior research has not sufficiently examined how startups effectively leverage this support. In this paper, therefore, we develop a framework to investigate the role that signals can play for early stage startups when they win prestigious government research grants. We test this framework in the setting of the emerging U.S. clean energy sector and find that in comparison to a matched sample of clean energy startups that have not won prestigious research grants, startups with these grants were 12 percent more likely to acquire subsequent venture capital (VC) funding. Another significant result is that the value of this signaling is greater for startups that have fewer patents. The important contribution of this finding is that it shows that signaling has the potential to redistribute benefits rather than just provide an additional accrual of advantages to the already high status actors. Together these results highlight the advantages for startups in emerging industries of pursuing signaling strategies with public agencies when they attempt to make important transitions through the stages of their organizational life cycles.

  Link(s) to publication:

  https://doi.org/10.1016/j.jbusvent.2017.10.001

• Fremeth, A.; Holburn, G. L. F.; Vanden Bergh, R., 2016, "Corporate Political Strategy in Contested Regulatory Environments", Strategy Science, December 1(4): 272 - 284.
  Abstract: We examine how firms strategically manage opposition from organized stakeholders who participate in regulatory agency policy-making processes. As stakeholder opposition in regulatory agency hearings increases, we argue that firms invest more in developing counter-balancing support from elected politicians who oversee regulators, and more so when regulators are less experienced or are closer to re-appointment dates. We find robust statistical support for our predictions in a statistical analysis of financial campaign contributions to state politicians by firms in the U.S. electric utility industry during the period 1999 to 2010. Our findings contribute to nonmarket strategy research by providing evidence that firms respond to contested regulatory environments by cultivating support from elected political institutions, contingent on the degree of regulator sensitivity to political and stakeholder pressures.

  Link(s) to publication:

  http://dx.doi.org/10.1287/stsc.2016.0021

• Fremeth, A.; Marcus, A. A., 2016, "The Role of Governance Systems and Rules in Wind Energy Development: Evidence from Minnesota and Texas", Business and Politics, December 18(3): 337 - 365.
  Abstract: Wind energy presents significant opportunity to provide a series of public goods. Drawing on the ideas of J.Q. Wilson and E. Ostrom, we compare options to overcome the obstacles that stand in the way of deploying wind energy in two U.S. states, Texas and Minnesota. Texas outperformed Minnesota in deploying wind energy technology despite Minnesota's ample wind and other natural advantages. We argue that it outperformed Minnesota because of a more fitting governance system and rules for determining (i) boundaries, (ii) cost and benefit allocation (iii) conflict resolution, and (iv) rule revision. The price Minnesota paid for its choice of governance system and series of rules was indecision and delay. Our approach sheds an alternative yet overlooked lens upon the topic of wind energy development by focusing on how the concentration of power and authority in the hands of a few dominant public and private elites can lead to the successful deployment of a complex renewable technology under particular circumstances.

  Link(s) to publication:

  http://dx.doi.org/10.1515/bap-2015-0045

• Fremeth, A.; Richter, B. K.; Schaufele, B., 2016, "Motivations for Corporate Political Activity", Advances in Strategic Management, May 34: 161 - 191.
  Abstract: Campaign contributions are typically seen as a strategic investment for firms recent empirical evidence, however, has shown few connections between firms’ political investments and regulatory or performance improvements, prompting researchers to explore agency-based explanations for corporate politics. By studying intra-firm campaign contributions of CEOs and political action committees (PACs), we investigate these two hypotheses surrounding public politics and demonstrate that strategic and agency-based motivations may hold simultaneously. Exploiting transaction-level data, with over 6.8 million observations, we show that (i) when PACs give to specific candidates, executives give to the same candidates, especially those who are strategically important to the firm and (ii) when executives give to candidates who are not strategically important, PACs give to the same candidates potentially due to agency problems within the firm.

  Link(s) to publication:

  http://dx.doi.org/10.1108/S0742-332220160000034006

• Fremeth, A.; Holburn, G. L. F.; Richter, B. K., 2016, "Bridging Qualitative and Quantitative Methods in Organizational Research: Applications of Synthetic Control Methodology in the U.S. Automobile Industry", Organization Science, March 27(2): 462 - 482.
  Abstract: We assess the utility of synthetic control, a recently developed empirical methodology, for applications in organizational research. Synthetic control acts as a bridge between qualitative and quantitative research methods by enabling researchers to estimate treatment effects in contexts with small samples or few occurrences of a phenomenon or treatment event. The method constructs a counterfactual of a focal firm, or other observational unit, based on an objectively-weighted combination of a small number of comparable but untreated firms. By comparing the firm’s actual performance to its counterfactual replica without treatment, synthetic control estimates, under certain assumptions, the magnitude and direction of treatment effects. We illustrate and critique the method in the context of the U.S. auto industry by estimating (a) the effect of government intervention in Chrysler’s management from 2009-2011 on its sales volumes, and (b) the impact of Toyota’s 2010 acceleration crisis’ on Camry sales.

  Link(s) to publication:

  http://dx.doi.org/10.1287/orsc.2015.1034

• Fremeth, A.; Holburn, G. L. F.; Spiller, P. T., 2014, "The Impact of Consumer Advocates on Regulatory Policy in the Electric Utility Sector", Public Choice, October 161(1): 157 - 181.
  Abstract: We examine the effect of consumer advocate participation in administrative procedures on regulatory policy. We use a unique panel database of rate reviews conducted for U.S. electric utilities from 1980 to 2007 to assess how state consumer advocates affect Public Utility Commission decisions on utilities’ allowed financial returns and rate structures. We find first that utilities experience fewer rate reviews in states with consumer advocates, consistent with utilities strategically postponing requests for rate increases. Second, after controlling for observed and unobserved state characteristics, we find that PUCs in states with consumer advocates permit a return on equity that is on average 0.45 percentage points lower than states without advocates equivalent to a 7.9 million (3.7%) reduction in average utility operating income, all else equal. Third, consumer advocates are associated with lower residential rates relative to other customer classes. Our findings provide statistical support for the thesis that institutionalizing interest group representation in administrative procedures is one way for legislatures indirectly to influence agency-determined policies.

  Link(s) to publication:

  http://dx.doi.org/10.1007/s11127-013-0145-z

• Fremeth, A.; Shaver, M., 2014, "Strategic Rationale for Responding to Extra-Jurisdictional Regulation: Evidence from Firm Adoption of Renewable Power in the US", Strategic Management Journal, May 35(5): 629 - 651.
  Abstract: It is well documented that firms respond to regulations in their home jurisdictions. We present hypotheses that firms also respond to regulations in jurisdictions where they do not operate. We examine renewable-power provision in the U.S. electrical utility sector between 2001 and 2006, and find firms adopt more renewable-power generation when their peers (i.e., firms in the same regulatory jurisdiction) face greater renewable-power standards in other jurisdictions. The underlying mechanism is that forward-looking firms assess when extra-jurisdictional regulations foreshadow regulatory changes where they operate. Our analyses support this mechanism versus plausible alternatives. We demonstrate firms acting strategically to respond to extrajurisdictional regulations and show the central conduit motivating this response is the extrajurisdictional footprint of firms operating in the same jurisdiction as a focal firm.

  Link(s) to publication:

  http://dx.doi.org/10.1002/smj.2118

• Fremeth, A.; Richter, B. K.; Schaufele, B., 2013, "Campaign Contributions over CEOs' Careers", American Economic Journal-Applied Economics, July 5(3): 170 - 188.
  Abstract: Individuals dominate money in politics, accounting for over 90% of campaign contributions, yet studies of drivers of individuals’ giving are scarce. We collected data on all contributions made between 1991 and 2008 by all 2,198 people who were S&P 500 CEOs for anyportion of that interval. We exploit variation in leadership status over these individuals’ careers to identify that being an S&P 500 CEO causes a 4,000 or 131% jump per election-cycle inpersonal giving. While some fraction of CEOs’ contributions can be attributed to long-standing preferences, the striking changes in behavior cannot be explained by these factors alone.

  Link(s) to publication:

  http://dx.doi.org/10.1257/app.5.3.170

• Fremeth, A.; Holburn, G. L. F., 2012, "Information Asymmetries and Regulatory Decision Costs: An Analysis of U.S. Electric Utility Rate Changes 1980-2000", Journal of Law, Economics & Organization, February 28(1): 127 - 162.
  Abstract: We argue that information asymmetries between regulators and firms increase the administrative decision costs of initiating new policies due to the costs of satisfying evidentiary or 'burden of proof' requirements. We further contend that regulators with better information about regulated firms - i.e. with lower information asymmetries - have lower decision costs, thereby facilitating regulator policy-making. To empirically test our predictions, we examine the relationship between regulatory informational environments and changes to regulated rates for all investor-owned electric utilities from 1980 to 2000. We exploit several natural sources of variation in the informational environments of U.S. state utility regulators. These stem from the prior experiences and administrative resources of regulators observable policy decisions of other regulatory agencies for a given utility and differences in procedural regulations pertaining to rate increases and decreases. Our results suggest that as regulators acquire more information about utility operations, including from experience in office, they are more likely to enact rate decreases and less likely to implement rate increases.

  Link(s) to publication:

  http://ssrn.com/abstract=1504203

• Fremeth, A.; Richter, B. K., 2011, "Profiting from Environmental Regulatory Uncertainty", California Management Review, November 54(1): 145 - 165.
  Abstract: We offer two integrated strategies managers can use in the face of regulatory uncertainty vis-à-vis the natural environment. As integrated strategies, they both recognize non-market forces while taking into account market realities. Advocating for Pragmatic, Progressive Policy enables firms to shape future policy around existing environmental strengths this strategy tips the scale towards a winning position by raising competitors’ costs when competitors have yet to develop identical competencies. Systematically Embracing Advancing Regulation enables firms to satisfy activists who would place pressure on policymakers to force firms to conform to higher environmental standards in other jurisdictions this strategy tips the scale towards a winning position by allowing managers to adapt to coming regulation at their own pace while leveraging market competencies. We begin by presenting a brief framework that assembles the building blocks necessary to justify when, how, and why our strategies reduce vulnerabilities to regulatory uncertainty. We then present four case studies that highlight how some firms have implemented these strategies. In the analysis of these cases, we illustrate the conditions under which some have been successful at mitigating regulatory uncertainty and some have not.

  Link(s) to publication:

  http://dx.doi.org/10.1525/cmr.2011.54.1.145

• Marcus, A. A.; Fremeth, A., 2009, "Green Management Matters Regardless", Academy of Management Perspectives, August 23(3): 17 - 26.
  Abstract: Today, it is undeniable that a new enthusiasm exists for green management, not only among managers but among business school students, though this enthusiasm is just starting to be tapped in a more formal way in curriculum, instructional materials, and faculty careers and advancement. Green management matters for many reasons, but fundamentally it matters because people expect managers to use resources wisely and responsibly protect the environment minimize the amounts of air, water, energy, minerals, and other materials found in the final goods people consume recycle and reuse these goods to the extent possible rather than drawing on nature to replenish them respect nature's calm, tranquility, and beauty and eliminate toxins that harm people in the workplace and communities. From a moral or normative perspective the obligation for green management is absolute, and whether it "pays" to be green is only partly relevant.

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