My kind of people: Political polarization, ideology, and firm location

Abstract

With increased political polarization, Americans are displaying more animus across, and affinity within, ideological identity groups. We argue this dynamic incentivizes firms to minimize ideological misalignments across their workforce by locating new establishments in areas that are ideologically proximate to their current operations. We further argue that the desire to minimize ideological distance to new establishments is stronger in knowledge-intensive industries and young organizations. We find support for these arguments through the analysis of over 220,000 new establishment openings from 2009 to 2014. Critically, we find the effect of ideological distance on location is stronger when societal polarization is high. Our theory, and findings, contribute to several literatures and advance our understanding of the impact of polarization on strategy.