CEOs and firm innovation: the role of political ideology

Innovation plays a critical role in the adaptability and survival of firms by enabling them to respond effectively to changing market conditions and create new avenues for growth. Existing research demonstrates that CEOs have a significant influence over firms’ innovation strategies. In this chapter, our objective is to examine how CEO political ideology, in terms of the position on the liberal-conservative continuum, shapes firms’ innovation efforts. We draw on upper-echelons theory, which underscores the role of executives’ personal orientations on their decisions, and the scholarship in political psychology that demonstrates the different values and psychological needs of liberals and conservatives. We found that CEO liberal orientation is associated with a greater number of innovations and higher innovation quality. Specifically, we observed that CEO liberalism influences innovation outcomes through increased investment in risky strategies such as R&D, capital investments, and mergers and acquisitions, which are integral drivers of firms’ innovation endeavors.