Political relationships and reputation are sunk assets that lock firms into lobbying.

Evidence

Many of the resources allocated for CPA have to be considered specific in the sense of Williamson (1975; 1985): Once deployed they are sunk and irretrievable. Building up a public affairs department not only leads to sunk costs due to the fact that the resources cannot just be transferred to another use; it is also the public reputation and most importantly the relational resources, for example, committee memberships and personal networks to political decision makers, that would be at stake in the case of closing down the department or terminating the relationship with administrative and government officials. — Georg Schreyögg and Jörg Sydow, The Hidden Dynamics of Path Dependence, 379

Categorization

• XREF: Connects directly to Milgrom’s account of reputation as forfeitable bond and to the diamond-trade literature on relationship-specific capital.