This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: Decisions such as whether to cut prices, launch a product, open a new facility or make an acquisition are among those companies that consider in pursuit of a competitive edge. New research from Texas A&M University suggests a CEO's political affiliation may be associated with whether the company's overall strategy follows industry peers or charts a different course.
In a study published in the Academy of Management Journal, researchers Krishnan Nair and Eric Y. Lee, assistant professors in the Department of Management at Mays Business School, found that companies led by Republican CEOs generally pursued competitive strategies that more closely resembled those of their industry peers, while Democratic-led firms tended to conform less. But those tendencies weren't fixed.
The political makeup of an industry's CEOs also mattered, suggesting that both political ideology and political identity may help explain how CEOs approach competitive strategy. The researchers examined the mix of actions companies take to compete. Those actions included acquisitions, alliances, new market entries, new products, price cuts, legal actions, facility openings and marketing activities.
To measure conformity, Nair and Lee compared each company's overall mix of competitive actions with those of its industry peers. In practical terms, it comes down to whether a company follows its competitors' lead or takes a different path. "Are you imitating more of what your competitors are doing, or are you bucking the trend and doing something different?" Lee said.
To study those relationships, Nair and Lee analyzed data from S&P 500 firms between 2010 and 2019. They determined CEOs' political affiliation using publicly disclosed political contributions to Democratic and Republican candidates and party committees. They used RavenPack, which tracks companies' competitive activities reported in the media, to track the firms' competitive actions.
Overall, Republican CEOs conformed about 18% more than Democratic CEOs in the competitive actions they pursued. The influence of industry composition was also substantial: Republican CEOs conformed more in industries with relatively fewer Democratic CEOs, while Democratic CEOs conformed more as the concentration of Democratic CEOs increased. That finding is important because previous research on CEO politics has largely focused on ideology.
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