This study examines the influence of corporate regulatory capabilities on firm performance with evidence from AI regulation in the United States (U.S.) medical device industry. Drawing on theories of political strategy and dynamic capabilities, we propose a T-shaped regulatory capability model with general and specific capabilities. Using data on 553 regulatory decisions from the U.S. Food and Drug Administration between 2001 and 2022, we explore how firm regulatory capabilities and multinational status affect regulatory approval time – a proxy of firm performance. The study shows that firms with higher regulatory capabilities and radiology-related products experience significantly reduced approval times. Although multinational status is negatively correlated with approval time as predicted, multinational firms with better regulatory capabilities are more likely to experience higher regulatory approval time suggesting complex submission processes or more stringent regulatory demands. Regulator-specific factors such as tenure and private sector experience also influence approval time. The study contributes to the nonmarket strategy and dynamic capabilities literature in international management by highlighting how regulatory expertise enhances firm performance in highly regulated, technology-driven markets. Practical implications include strategies for leveraging regulatory capabilities to gain competitive advantages in dynamic industries characterized by using evolving technologies to address grand challenges.
