The Effect of Two Dimensions of CEO Political Ideology on Corporate Entrepreneurship

Abstract

We examine how two dimensions of CEOs’ political ideologies – social and economic – each influences top management team (TMT) decision-making processes and in turn corporate entrepreneurship. We theorize that CEOs’ social liberalism influences the amount and types of information used during TMT decision-making processes, while CEOs’ fiscal liberalism influences the degree of cooperation occurred during TMT decision-making processes. We also hypothesize that these two ideology dimensions influence corporate entrepreneurship through TMT decision-making processes. We test our theory with a sample of 141 small and medium-sized Iranian firms. We find that TMTs with socially liberal CEOs tend to go through more extensive information search processes, which in turn is negatively related to corporate entrepreneurship, and that TMTs with fiscally liberal CEOs tend to go through more cooperative processes, which in turn is positively related to corporate entrepreneurship. This study re-conceptualizes executive political ideology by disentangling the distinct effects of social and economic dimensions of ideology and yields new theoretical insights on the implications of executive political ideologies for firm strategies and outcomes. In addition, through explicit examination of the mediating mechanisms, this study develops more precise theoretical explanations of how CEO political ideologies affect strategic behaviors.