Performance Implications of Business-to-Government Relationships and Political Marketing Strategies

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2022-05
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Yan, Shuai
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Lee, Ju-Yeon
Kim, Stephen
Feng, Hui
Zhang, Wei
Cao, Chengxin
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Marketing
Abstract
An increasing number of firms have recognized the federal government as an important customer. The annual spending of government customers has reached more than $500 billion. Attracted by this trillion-dollar-worth marketplace, more than 60% of the Fortune 1000 strive to serve government customers and increase their share in this business-to-government (B2G) market. However, firms also face numerous challenges in achieving growth in this marketplace due to the unique nature of government customers, including heavy regulations, stringent relationship oversight, and high asset specificity in the procurement process. In response, firms prevalently leverage merger and acquisition (M&A) and strategic appointment of political figures to enhance their presence in B2G markets and improve relationships with government customers. Based on these two strategic paths, this dissertation develops two essays to examine the performance implications of (1) customer asset strategies (i.e., acquiring a firm with overlap or new customers) and (2) revolving door appointment (i.e., appointing a former government official as a board member). Collecting the data of more than 400 M&A events over a 17-year period and the board members of more than 100 firms over a 13-year period, this dissertation found that firms should acquire the target with new customer assets to capture the superior market value and should appoint former government officials as board members to build, expand and maintain the relationship with government customers. These findings make unique contributions to marketing theories and practitioners.
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