This paper develops and tests a theory of the performance determinants of a firm's nonmarket strategy in shaping public policy outcomes. Building on the concept of political market attractiveness, we argue that nonmarket performance is influenced by both the characteristics of a firm's regulatory and political environment, especially rivalry among interest groups or politicians, and by internal capabilities that enable a firm to mitigate political transaction costs. Using data on regulatory filings for rate increases made by U.S. electric utilities over a 13-year period, we find empirical support for our approach.