Do Trade Associations Matter to Corporate Strategies?

Abstract: This paper uses textual analysis and plausibly exogenous instruments based on out-of-industry signals from geographic and director networks to assess the role of trade associations in forming corporate strategies. Companies are most likely to join trade associations when innovative opportunities have declined, and they are older and larger. Joining associations helps members to increase profits and markups, improve risk management, find acquisition partners and improve efficiency. To assess mechanisms regarding higher profits, we consider high dimensional analysis of geographic and technological market exclusivity using firm-pairs and hundreds of strategic decisions to operate in specific markets. Overall we find strong support for the conclusion that associations bring positive and mutually beneficial gains and technologies to their members and their industries, and some evidence of an externality in the form of anti-competitive market-exclusion strategies.

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