Abstract

Several scholars have asserted strategic fit to nonmarket factors is positively related to economic performance. Political strategic fit has traditionally been conceptualized as an incremental decision: firms engage in political activities to the extent nonmarket factors suggest firm political actions will improve economic performance. However, the decision to engage in political activity is more of a dichotomous decision. Both incremental and dichotomous political strategic fit are empirically evaluated in the U.S. coal industry from 1986 to 2000. Empirical evidence suggests that political strategic fit should be modeled as a dichotomous decision and that engaging in political activity is positively related to economic performance. Under investing in political activity or pursuing a free riding strategy was negatively related to economic performance