Antecedents and Consequences of the Revolving Door between U.S. Regulatory Agencies and Regulated Firms

In three essays, I investigate the antecedents and consequences of the firm-government revolving door, a type of employee mobility between firms and their regulators. In contrast to previous studies, which categorize the revolving door as a type of corporate political strategy, I suggest that both firms and governmental entities actively participate in the revolving door for their own strategic purposes. I argue that firms may hire former regulators in order to acquire their regulatory expertise, as well as their connections to current regulators. On the other hand, governmental entities, such as regulatory bodies, may hire individuals with regulated industry experience in order to build industry support for regulatory initiatives, as well as to learn how to regulate more effectively. Finally, as a consequence of this type of personnel movement, firms may obtain more favorable regulatory outcomes due both to the cognitive and regulatory capture of current regulators through past or (potential) future employment, respectively. Using a novel database containing career histories of all commissioners who served on 17 U.S. Independent Regulatory Commissions from 1887-2000, in Chapters II and III, I find evidence in support of firms and regulatory bodies both partaking in revolving door for their strategic ends. Furthermore, using another unique database of revolving doors between the USDA and its regulated agribiotechnology firms, in Chapter IV I find evidence for the revolving door contributing to more favorable regulatory outcomes for firms during the revolving regulators’ tenures. Thus, this project sheds light on the antecedents and the consequences of cross-sector mobility. The results of my study suggest that firms are able to skew regulatory outcomes in their favor, by using their new revolver hires to learn about, and influence the regulatory process. However, any negative consequences of such skewness may be at least partially balanced by the positive consequences of the regulatory agencies’ learning and support building with industry, which may improve regulatory quality.