Sunday, June 2, 2019

Liberal and Conservative Companies: How Organizational Location and Politics Intermingle

You may know Nike as a liberal company in US politics – it is known for marketing statements with a liberal bent, and it also has liberal corporate policies such as transparency about manufacturing locations and labor practices. It is based in Beaverton, Oregon, a state that generally sends  Democrat representatives to the US Congress. Dell is a conservative company, though it is more obviously conservative in its political donations than in public statements. It is based in Round Rock, Texas, a state that most often elects Republicans senators and representatives. Are these facts connected?

A recent paper by Abhinav Gupta and Forrest Briscoe in Administrative Science Quarterly looked at the connections between firms‘ politics and their locations, and it found some relations that should be surprising. Let’s start with the more obvious ones. First, firms differ in how conservative or liberal they are. This can be measured by the political donations of their employees, and liberal firms are more sensitive to their surroundings and likely to concede to social movements’ demands. Second, the relation between employees’ political leanings and firms’ behaviors is stronger when employees are closer to the headquarters. The employees in Nike-owned stores far away from headquarters will not matter as much for the headquarters’ thinking and decisions as the employees in the headquarters.

Now for the really new stuff. Both Nike and Dell have political leanings that match their locations pretty well. That seems quite normal, and it matches some other firms we know about such as Seattle-headquartered Starbucks. But there are also firms that are more liberal or conservative than the average voter in their state, such as the software company SAS, which is in Cary, North Carolina and much more liberal than its state. If we compare equally liberal firms in a conservative and a liberal state, which one will be more likely to concede to the pressures of a social movement? You might think that it would be the liberal firm in the liberal state because its management feels more secure taking such actions. In fact, it is the opposite. The liberal firm in a conservative state will take a stand, so it will be more liberal than a liberal firm in a liberal state. Similarly, a conservative firm will take a more conservative stance if it is in a liberal state.

So, location and politics intermingle in organizations in ways that go beyond what you might expect if you thought of organizations as sponges that absorb whatever is around them. Employees can shape their organizations’ messages and actions in the political sphere. They are clearly more influential than people who live or work near the organization but who aren’t employees, because employees’ views not only shift organizational politics but also prompt the organization to take a stand against community members’ opposing views. People outside the organization can try to influence its beliefs and actions, but whether they succeed is largely a function of the views held by those on the inside.

Gupta, A., and F. Briscoe
2019. "Organizational Political Ideology and Corporate Openness to Social Activism." Administrative Science Quarterly, forthcoming.

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