Corporate political activity (CPA), a non-market strategy, significantly benefits firms by enhancing risk management and competitive advantage. While numerous studies have explored CPA's external antecedents (political and social environments), internal factors within the firm remain less understood. Prior research examining internal predictors has focused on firm size and ownership structure, with inconsistent findings regarding the role of firm resources. Furthermore, the influence of managerial behavior on CPA has been largely overlooked, despite calls for greater attention to micro-level managerial factors. The behavioral theory of the firm posits that CPA engagement hinges on both the firm's ability and willingness to engage. This study addresses the gap in existing literature by examining the role of organizational slack (representing ability) and entrepreneurial orientation (EO, representing willingness) in explaining firms' CPA activities. Organizational slack, encompassing financial and operational slack, may differentially affect CPA due to variations in flexibility and scarcity. EO, defined by its two dimensions—entrepreneurial behavior and managerial attitude toward risk—influences the firm's decision to engage in CPA. The study hypothesizes that EO mediates the relationship between organizational slack and CPA, addressing limitations in prior research, which often lacks explanatory power and understanding of the engagement mechanism. The chosen two-dimensional framework for EO offers several advantages, notably addressing the covariation issues within the more widely-used three-dimensional paradigm. This study will contribute to the literature by empirically testing the heterogeneous effects of different slack types, elucidating the mediating role of EO, and enhancing the behavioral theory of the firm within the context of CPA.

The literature review examines existing research on corporate political activity (CPA), highlighting the gap in understanding the internal mechanisms driving firm engagement. While the external influences of political and social environments have been extensively researched, internal firm-level factors, especially managerial behavior, remain under-explored. Prior research exploring internal predictors such as firm size and ownership structure yielded inconsistent results concerning the impact of resources. Furthermore, the influence of managerial decision-making processes on CPA engagement requires more attention. This review highlights the behavioral theory of the firm, suggesting that a firm's ability and willingness to participate in CPA are critical factors. The concept of organizational slack (financial and operational) is introduced as a key indicator of a firm's ability, while entrepreneurial orientation (EO), encompassing both entrepreneurial behavior and managerial attitude toward risk, is identified as a crucial determinant of a firm's willingness. The review critically assesses the inconsistencies in previous studies regarding the relationship between slack resources and CPA, emphasizing the need to consider the diverse effects of financial and operational slack. Similarly, it points out that the impact of EO on CPA has been insufficiently researched. The authors' proposed model integrates these elements to investigate the interaction between the firm's resources and managerial preferences in driving CPA engagement. It also addresses limitations in existing research by using a two-dimensional measure of EO to avoid issues associated with three-dimensional models found in prior studies.

This study employed a questionnaire survey to collect data from 303 firms across 23 provinces in mainland China. Data collection spanned 2010-2011, a period following government stimulus packages, providing a relatively stable external environment suitable for examining internal firm-level drivers of CPA engagement. A rigorous methodology ensured data reliability and validity: translation and back-translation techniques were used, local researchers were involved, and face-to-face interviews were conducted to clarify the questionnaire. The sampling procedure involved a three-stage process: dividing provinces into three regions, randomly selecting 500 firms from each region's industry directories, and contacting selected firms for participation via email and telephone. A total of 303 firms participated, yielding a response rate of 10.1%. The sample encompassed diverse firm characteristics (ownership structure, size, location) and respondent profiles (managerial experience and position). A non-response bias test revealed no significant differences between participating and non-participating firms. The study employed multi-item Likert scales to measure the key variables: CPA, financial slack, operational slack, entrepreneurial behavior, and managerial attitude toward risk. Confirmatory factor analysis (CFA) using Amos 17.0 was conducted to assess the validity and reliability of the measurement scales. The results showed adequate model fit and satisfactory convergent and discriminant validity, with Cronbach's alpha values exceeding 0.80. Control variables (industry development stage, industry competitiveness, market share, marketization level, and industry sector) were included to account for potential confounding factors. Ordinary least squares (OLS) regression with SPSS 19.0 was used to test the hypotheses. Hierarchical regression analysis was used to examine the effects of organizational slack and EO on CPA, while PROCESS was employed for mediation analysis. A Z-test was performed to compare the effects of financial and operational slack.

The hierarchical regression analysis supported several key hypotheses. Both financial and operational slack positively influenced CPA (H1a), with financial slack exhibiting a stronger effect (H1b). Both financial and operational slack positively predicted both entrepreneurial behavior and managerial attitude toward risk (H2a and H2c), but the difference between their effects on these two EO dimensions was not statistically significant (H2b and H2d). Regarding the direct impact of EO dimensions on CPA, only managerial attitude toward risk showed a significant positive effect (H3b), while entrepreneurial behavior did not (H3a). Mediation analysis using PROCESS revealed that managerial attitude toward risk significantly mediated the positive relationship between both financial and operational slack and CPA (H4b). This suggests that firms with high levels of slack are more likely to engage in CPA, but this requires a managerial attitude that embraces risk and is proactive in leveraging these resources. Notably, entrepreneurial behavior did not show any mediation effect (H4a). Further post-hoc analysis, using PROCESS, confirmed that managerial attitude toward risk mediates the indirect effect of entrepreneurial behavior on CPA. The results are summarized in Table 6, displaying the hypotheses, expectations, and whether they were supported or not.

The findings provide valuable insights into the internal mechanisms driving firms' engagement in CPA. The study addresses the ongoing debate concerning the role of organizational slack by demonstrating that its effects are heterogeneous: financial slack provides a direct and readily deployable resource advantage for engaging in CPA, while operational slack offers a more subtle, less immediate impact. The study highlights the critical role of managerial decision-making in leveraging slack resources. Although organizational slack provides the resources required for CPA, EO, particularly the managerial attitude towards risk, is crucial in determining whether these resources will actually be employed for political actions. The insignificant mediation effect of entrepreneurial behavior suggests a potential focus on internal innovation rather than external political opportunities. The study's contribution lies in its empirical demonstration of the mediating effect of managerial attitude toward risk. It suggests that managers need to cultivate a risk-taking approach to strategically allocate resources to engage in CPA effectively. This bridges the gap between the firm's objective resource base and its subjective engagement decisions, deepening the understanding of the CPA engagement mechanism. The findings provide robust support for the integration of the behavioral theory of the firm into the study of CPA.

This study offers crucial insights into the drivers of corporate political activity (CPA), demonstrating the interplay between organizational slack, entrepreneurial orientation (EO), and managerial risk appetite. The key finding emphasizes the mediating role of managerial risk attitude, highlighting the importance of internal decision-making processes alongside resource availability. Future research could explore the generalizability of these findings across diverse contexts and utilize longitudinal data to strengthen causal inferences. Further research could also focus on different types of CPA strategies and potentially incorporate other internal factors to build a more comprehensive model of CPA engagement.

The study's limitations include the use of subjective measures and cross-sectional data, which limits the establishment of strong causal relationships. The reliance on self-reported data may also introduce bias. Future longitudinal studies with objective data sources, such as firm-level financial statements, would significantly strengthen the study's findings and increase the reliability and validity of the research. The focus on Chinese firms might limit the generalizability of the results to other contexts. Further research in different national settings would enhance the study's external validity.