Ideology or Identity? CEO Political Party Affiliation and Conformity in Competitive Strategy

Abstract

Abstract

Building on the premise that political party affiliation reflects one’s ideology and core values, various studies in the upper echelons literature have examined the link between CEO political party affiliation and decision-making. In contrast, recent work in political psychology suggests that party affiliation shapes behavior largely because it serves as a salient social identity. Taking a reconciliatory approach, the present work highlights the value of both perspectives in explaining the CEO’s orientation toward conformity. According to the ideology literature, Republicans display greater conformity than Democrats due to dispositional differences in how much they value conformity. On the other hand, the identity perspective suggests that both Democrats and Republicans strive to conform to co-partisans and distinguish themselves from counter-partisans. Integrating insights from both perspectives, we theorize that Republican CEOs generally display greater conformity than Democratic CEOs due to dispositional differences, but that the extent to which these dispositional tendencies translate to competitive strategy depends on the political composition of CEOs in a given industry. Finally, we draw on self-concordance theory to theorize about the performance implications of fit and misfit between CEO party affiliation and conformity. We find support for our predictions in a sample of S&P 500 firms from 2010 to 2019.