Out of character: CEO political ideology, peer influence, and adoption of CSR executive position by Fortune 500 firms

• Date: 01 March 2021
• Author: Anna Fung,Chad Murphy,Abhinav Gupta
• DOI: http://doi.org/10.1002/smj.3240
• Published date: 01 March 2021

RESEARCH ARTICLE

Out of character: CEO political ideology, peer

influence, and adoption of CSR executive

position by Fortune 500 firms

Abhinav Gupta

1

| Anna Fung

2

| Chad Murphy

3

1

Department of Management &

Organization, Foster School of Business,

University of Washington, Seattle,

Washington

2

Department of Management, Kogod

School of Business, American University,

Washington, District of Columbia, 20016

3

College of Business, Oregon State

University, Corvallis, Oregon

Correspondence

Abhinav Gupta, Department of

Management & Organization, Foster

School of Business

University of Washington, 589 Paccar

Hall, Seattle, WA 98195.

Email: abhinavg@uw.edu

Abstract

Research Summary: We consider the link between

firms' decisions to adopt a CSR executive position and

the political ideology of prior adopter CEOs. We theo-

rize that firms are more likely to adopt a CSR executive

position when it has been previously adopted by

conservative-leaning CEOs at other firms, as opposed

to liberal-leaning CEOs. This effect is due, we argue, to

the increased perceptual salience and situational attri-

butions associated with ideologically incongruent

actions (i.e., actions that appear inconsistent with

known political values). We further posit that these

effects are stronger when the observing firms experi-

ence increased salience of CSR issues due to share-

holder pressure and institutional equivalence between

the referent and the observing firms. We find support

for these ideas in a longitudinal sample of Fortune

500 companies.

Managerial Summary: How do CEOs' values affect

industry-wide appointments of senior executives in

charge of Corporate Social Responsibility (CSR)? Prior

research suggests that liberal political beliefs of CEOs

predict their CSR commitments. Our study explores

how the political beliefs of CEOs—in this case, CEOs

who have created a new CSR executive position in their

companies—influence the likelihood that peer CEOs

will imitate their decisions. Specifically, we find that

when conservative CEOs adopt a CSR executive

Received: 25 October 2018 Revised: 24 April 2020 Accepted: 3 July 2020 Published on: 4 October 2020

DOI: 10.1002/smj.3240

Strat Mgmt J. 2021;42:529–557. wileyonlinelibrary.com/journal/smj © 2020 Strategic Management Society 529

position, other companies are more likely to follow

than when liberal-leaning CEOs do so. These effects

are even stronger when companies are experiencing

CSR-related pressure from shareholders and when they

belong to the same industry and community as the

firms of the CEOs they are observing.

KEYWORDS

corporate social responsibility, diffusion, political ideology, top

management teams, upper echelons

1|INTRODUCTION

Organizational life is rife with uncertainty as decision-makers struggle to predict the outcomes

of potential strategic decisions. A substantial body of research in organizational theory suggests

that one way decision-makers may reduce this uncertainty is by imitating prior decisions of

other firms facing a similar task environment, such as those in the same industry (Cyert &

March, 1963; Greve, 2005; Haunschild & Miner, 1997; Strang & Soule, 1998). Indeed, a strategic

decision that sets a precedent at an industry-peer (or “referent”) firm helps executives at the

observing (or “focal”) firm justify their own decision, providing prima facie evidence or social

proof regarding the technical (e.g., financial performance) and social (e.g., legitimacy) merits of

that action (Rao, Greve, & Davis, 2001). Of course, the usefulness of any such benchmark varies

significantly, given that certain referent firm decisions will be considered more worthy of emu-

lation than others. Research suggests, moreover, that referent firm characteristics influence

these assessments, shaping the salience and perceived underlying merits of the referent firm's

decisions and thereby affecting the likelihood that those decisions will be emulated. For exam-

ple, larger, more prestigious, and higher-performing firms are imitated at higher rates than

smaller, less prestigious, and poorly performing firms (DiMaggio and Powell, 1983; Davis, 1991).

In this way, prior research has provided important insights regarding the link between the

observable characteristics of a referent firm and subsequent inter-organizational imitation by

observing firms.

Curiously, however, prior inter-organizational imitation research has largely overlooked

how the characteristics of the decision-makers in these referent firms—that is, the CEOs who

are highly visible to observers—might influence the likelihood that their firms' decisions will be

emulated (for an exception, see Gupta & Misangyi, 2018). This relative lack of attention to exec-

utive characteristics is problematic, particularly when viewed through the lens of upper eche-

lons theory, which suggests that CEO personal characteristics, such as demographic attributes,

occupational background, personality, and values, fundamentally influence firms' decisions

(Barker & Mueller, 2002; Finkelstein, Cannella, Hambrick, & Cannella, 2009; Hambrick &

Mason, 1984; Nadkarni & Herrmann, 2010; Westphal & Zajac, 1995). Recent research indicates,

in particular, that CEO political ideology is an especially influential CEO characteristic (Chin,

Hambrick, & Trevino, 2013). Indeed, not only does ideology directly predict important strategic

decisions such as engagement in corporate social responsibility (CSR), but it also has second-

order effects on external stakeholders who attend to this CEO characteristic and act “according

530 GUPTA ET AL.