Too Afraid to Act? How CEO Political Ideological Divergence Influences Environmental Innovation

Abstract

In their efforts to combat climate change, some firms choose to develop environmental innovations. Given that environmental innovation strategies fall into the politically sensitive area of climate change protection, we theorize that CEO political ideological divergence can substantially impact the chosen strategy. Drawing on threat response theory, we find that CEO ideological divergence from a Republican president negatively affects environmental innovation intensity, while ideological divergence from a Democratic president positively affects it. Moreover, increased communication of sustainability orientation weakens this studied impact. We utilized a longitudinal data set of S&P 500 CEOs (2010–2018) with 916 firm-year observations and 188 unique firms, to present theoretical and managerial implications for environmental innovation, CEO political ideology, and threat response theory.