Corporate political strategy (CPS) literature presents a puzzle: does CPS buffer (safeguard) or bridge (bind) managerial discretion in face of political expropriation? To unpack this puzzle, we distinguish between relational and transactional approaches to CPS and examine its differential impact on managerial discretion to make covert political donations. Integrating resource dependence (RDT) with managerial discretion theory, we argue that both CPS approaches have a positive influence on propensity to make covert political donations suggesting a binding effect of political strategy on managerial discretion to make covert political donations and vulnerability for political expropriation. This positive association is stronger for transactional CPS due to lack of accumulated political capital. We examine how institutional contingencies (regulatory scrutiny) and resource dependencies (poor prior performance) moderate these relationships. We argue that regulatory scrutiny weakens the binding effect to make covert political donations, while poor prior financial performance strengthens it. We test our hypotheses by using a unique data of board political connections and covert political donations made by listed Indian firms through electoral bonds from 2019 to 2024 and find statistically significant results. Our research contributes to the literature on CPS, RDT, and managerial discretion by elucidating the conditions under which CPS either buffer or bind firms to political demands. Additionally, the opaqueness of such practices sheds light on the degree of ethics underlying these activities.
