Over the past four decades the U.S. governments have faced the daunting challenges for creating regulatory schemes of environmental protection. Having a long history with few restrictions on their use of natural resources and nature’s goods, firms have typically resisted regulations that protect the environment and human health. Historically, firms also imposed negative environmental externalities on society with little voluntary restraint, in large part because each individual business widely acknowledged that none could take effective action to control the risks that they face alone (Dolsak and Ostrom, 2003). Such a setting accounts for why the first generation of environmental regulations was largely compulsory and deterrence-based (Press and Mazmanian, 2012), and why much scholarly attention has been given to private sector’s efforts to weaken or defeat these policies (Kamieniecki, 2006). While avoidance or resistance to mandatory environmental regulations is a rational response for business, it leads to suboptimal gains for society as a whole. However, more recently, some firms are taking a more collaborative approach to society’s demands for strict environmental regulations and are offering socio-political support for mandatory governmental regulatory approaches (especially related to climate change regulation). As yet, we know little about these businesses.

Using the U.S. federal climate change policy context, this paper undertakes a systematic assessment of why some firms support mandatory climate regulation, while others do not. Drawing on scholarship in both the policy and management sciences, we investigate whether S&P 500 firms’ organizational capabilities influence their political support and potential collaborative intentions. After controlling for selection bias related to firms’ decisions to adopt organizational capabilities, our results indicate that in fact some types of organizational capabilities-organizational learning, continuous improvement, and stakeholder engagement capabilities- are significant predictors of firms’ support for mandatory climate regulations. These findings offer important dimensionality to our existing knowledge of firms’ varied responses to regulations, as well as refuting the conventional wisdom of businesses as a single monolithic interest group. This study also sheds light on businesses as public policy drivers, informing policy makers and public managers alike of the importance of building coalitions with private sector to pass broad federal climate change legislation. Our findings contribute to the broader discussion about firms as critical partners in policy-making (Donahue and Zeckhauser, 2011; Fiorino, 2006) and inform the circumstances under which policy makers can establish cooperation with firms and produce win-win outcomes, while overcoming the tragic logic of the collective action dilemma.