Organized business interests often seek to block public interest regulations, but how they engage depends on institutional context. We argue that in federal systems state policy and politics can have a home state effect on firm preferences and political behavior at the national level. State policies can force firms to absorb regulatory cost, thus reducing the marginal cost of national policies. In addition, firms regulated at the state level have incentives to strategically align with their state governments to avoid future regulatory cost. We test our argument by matching original data on the positions of electric utilities towards the Clean Power Plan and data on ad hoc coalition membership with data measuring state policy stringency and state government positions. Quantitative evidence is consistent with hypotheses: both state policies and state politics influence utilities’ national positions. Elite interviews clarify different mechanisms. Findings underscore how sub-national governments shape national interest group politics.
The new version includes minor updates to the manuscript based on reviewer feedback.