Eppa Rixey (MIT Sloan School of Management)

Crafting Policy: Gaining Influence Through Strategic Compromises and Enduring Coalitions in Corporate Political Activity

Abstract: How can smaller firms stymied by regulatory constraints gain sufficient influence to overcome larger, better resourced, and more experienced incumbents lobbying to protect the industry’s regulatory status quo? Much existing work claims that weaker actors act collectively in political arenas. By itself, coordinating across many smaller firms is difficult and, when successful, does not eliminate the threat of being seen as a narrow special interest group rather than an economically and politically important industry. This is the challenge that faced craft brewers over the last several decades as popular and profitable business models like brewpubs and taprooms that sell directly to consumers (DTC) had been illegal in all 50 states prior to 1982. Distributors and retailers benefited from state-level prohibitions on direct sales to consumers by brewers and vigorously opposed most changes that would open the marketplace. Yet, in 2022 over 7,000 DTC-focused breweries operate in the US.

This research examines these state-level regulatory and market transformations through a combination of interviews, fieldwork, and extensive archival data on both successful and unsuccessful policy change efforts in six states selected for a similar range of attributes but different regulatory and industry outcomes. The present study shows that conventional strategies of collective action and collaboration via a trade association are important but often insufficient to change firmly institutionalized regulations defended by incumbents. Each state in this study had a functioning trade association representing most craft breweries, but sustained regulatory influence was observed only in states where full-time leaders of these associations understood the political landscape and developed policy partnerships to tilt the odds in their favor. Policy partnerships entailed formal legislation alleviating key regulatory constraints on craft beer business models while also including new provisions that ensured long-term alignment among the partners. Committed trade association leaders with appropriate social distance -- the closeness of experience and role-based relationships but enough detachment to apprise the situation realistically -- brokered partnerships that expanded the industry’s rent chain. These pragmatic coalition brokers enable a relatively smaller interest group like craft brewers to credibly broaden their regulatory influence through ongoing compromises and enduring coalitions.