Research title; Impact of CEO political activeness on strategic dynamism / distinctiveness

Research question;

1. Does the degree of a firm’s CEO being politically active lead the firm to change
their strategies more frequently?
2. Does the degree of a firm’s CEO being politically active lead the firm to adopt
strategies that are different from their industry peers?

As Eisenhardt et al (2010) has argued, organizations drift toward exploitation, and

achieving ambidexterity comes through unbalancing to favor exploration. But, from the
managerial perspective, this mission imposes a cognitive problem. As boundedly rational
individuals, CEOs are driven to focus on what is current and tangible at hand (Mintzberg,
1973). To the extent that they focus their attention on exploitation, they lose their
attention to exploration. How can they promote organizational exploration and thus
ultimately achieve ambidexterity although their attention to exploration is inherently
limited?

I find the answer to this question from CEOs’ political activeness. According to
previous studies on CEO political ideologies, having republican ideologies, compared to
democratic ones, have different implications on strategic outcomes such as corporate
social responsibility (Chin, Hambrick & Treviño, 2013), corporate entrepreneurship (Chin
et al., 2021), and threat response (Semadeni, Chin & Krause, 2021). While these studies
shed light on how CEOs’ political values affect their strategic decision-making process,
they paid scant attention on how the behavior of actually ‘paying attention to the
external politics’ influence their cognition and consequent decisions. Based on the
attention-based theory, I argue that being politically active by paying attention to the
external environments leads the CEOs to change their strategies more often (strategic
dynamism) and seek for strategies that differentiate themselves from the industry peers
(strategic distinctiveness).

Dataset

To test my hypotheses on CEO political activeness and strategic dynamism /

distinctiveness, I set the sample for my study as the Fortune 500 firms from 2008 to
2018. First, given that CEO’s political activeness can be values that affect one’s decision-
making process over a long time period, I measured the CEO’s political activeness using
the data on CEO’s donation to political parties from 1998 to 2018, which can reflect at
least 10 years of CEOs’ political activities. For the strategic dynamism / distinctiveness
measure, I collected the data on unrelated diversification (Compustat, two digit SIC
code), related diversification (four digit SIC code), and New product introductions (Capital
IQ).
Estimand

While my study is not based on the RCT, I suppose that the closest estimand that
my study can employ would be average treatment effect (ATE), given that I want to
compare the behaviors of CEOs who are politically active (which can be considered as
the treatment group) to those who are not (which can be considered as the control
group).

Proposed method

To account for the nature of the panel data, I suppose that I will employ
Generalized Estimating Equation (GEE) for my analysis. At the same time, given that our
data will include firms from different industries with distinctive characteristics, I will also
include the industry fixed effects based on three digit SIC code. Additionally, given that
the sample period of this study (2008-2018) includes the financial crisis, I will also include
the year fixed effects.

Reference

Chin, M. K., Hambrick, D. C., & Treviño, L. K. (2013). Political ideologies of CEOs: The
influence of executives’ values on corporate social responsibility. Administrative Science
Quarterly, 58(2), 197-232.

Chin, M. K., Zhang, S. X., Jahanshahi, A. A., & Nadkarni, S. (2021). Unpacking political
ideology: CEO social and economic ideologies, strategic decision-making processes, and
corporate entrepreneurship. Academy of Management Journal, 64(4), 1213-1235.

Eisenhardt, K. M., Furr, N. R., & Bingham, C. B. (2010). CROSSROADS—Microfoundations

of performance: Balancing efficiency and flexibility in dynamic environments.
Organization Science, 21(6), 1263-1273.

Mintzberg, H. (1973). The nature of managerial work.

Semadeni, M., Chin, M. K., & Krause, R. (2021). Pumping the brakes: Examining the
impact of CEO political ideology divergence on firm responses. Academy of
Management Journal, (ja).