The Pennsylvania State University

The Graduate School

The Mary Jean and Frank P. Smeal College of Business

ORGANIZATIONAL POLITICAL IDEOLOGY AND FIRMS’ MARKET AND

NON-MARKET BEHAVIOR

A Dissertation in

Business Administration

by

Abhinav Gupta

© 2015 Abhinav Gupta

Submitted in Partial Fulfillment of the Requirements

for the Degree of

Doctor of Philosophy

August 2015

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The dissertation of Abhinav Gupta was reviewed and approved* by the following: Forrest Briscoe Associate Professor of Management Dissertation Advisor Chair of Committee Donald C. Hambrick Evan Pugh Professor and Smeal Chaired Professor of Management Srikanth Paruchuri Associate Professor of Management John D. McCarthy Distinguished Professor of Sociology Brent Ambrose Smeal Professor of Real Estate Director of PhD Program *Signatures are on file in the Graduate School

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ABSTRACT

This dissertation examines the influence of organizational political ideology on firm’s

market and non-market behaviors. I investigate how politically liberal and conservative

firms differ in their responses to disruption, either in their external environment, or their

internal performance. In the first study, I address the question of how liberal and

conservative firms adopt different non-market responses to protest by activist

stakeholders. Given that liberal and conservative ideologies differ in their preference for

incorporating the interests of diverse stakeholders vs. pursuit of the singular goal of

shareholder value creation, I theorize that liberal firms may adopt more substantive

concession-based responses to activist protest, whereas conservative firms will adopt

more impression-management based responses. At the same time, I expect that activists

will anticipate differences in liberal and conservative firms’ proclivities and reflect them

in their selection of targets. In the second study, I aim to shed light on how liberal and

conservative firms may adopt different preferences regarding divestitures of business

units. I propose that due to inherent differences in prevailing conceptions of the firm,

liberal firms will be less likely to engage in business unit divestitures during periods of

poor firm performance. Further, I theorize that, due to underlying values that engender

greater concern for the divested unit and its employees, liberal firms will be more likely

to sell the unit to an industry-outsider firm, and less likely to sell the unit to a private

equity firm, relative to conservative firms. Lastly, I anticipate that liberal firms’ greater

concern for social and human costs involved in divestiture decision-making will lead

them to have higher post-divestiture firm performance. The findings broadly provide

support for my expectations, and advance an “ideological theory of the firm.”

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TABLE OF CONTENTS

List of Figures………………………………………………………...………………….. vi

List of Tables…………………………………………………………………………..... vii Acknowledgements……………………………………………………………………...viii Chapter 1 – INTRODUCTION…………………………………………………………… 1

1.1. Theoretical Background……………………………………………………… 2 1.2. Organizational Ideology on Political Liberalism-Conservatism Axis……….. 5 1.3. Mechanisms…………………………………………………………………...8 1.4. Research Questions…………………………………………………………..10 1.5. Dissertation Overview……………………………………………………….10

Chapter 2 – ORGANIZATIONAL POLITICAL IDEOLOGY AND CORPORATE RESPONSES TO ACTIVIST PROTEST………………………………………………. 13

2.1. Background on Organizational responses to Activism……………………... 18 2.2. Theory and Hypothesis Development………………………………………. 20

2.2.1. Organizational Ideology and Concessions to Social Activists…….20 2.2.2. Organizational Ideology and Deployment of Impression-

Management Tactics……………………………………………… 24 2.2.2.1. Pro-social Claims…………………………………………24 2.2.2.1. Corporate Social Responsibility…………………………. 25

2.2.3. The Moderating Effects of Stakeholder Type – Primary vs. Secondary………………………………………………………… 27

2.2.4. Organizational Ideology as a Determinant of Activist Selection of Targets……………………………………………………………. 30

2.3. Methodology………………………………………………………………... 31

2.3.1. Sample…………………………………………………………….. 31 2.3.2. Measurement of Organizational Ideology…………………………32 2.3.3. Dependent Variables……………………………………………… 34 2.3.4. Independent and Moderator Variable……………………………...36 2.3.5. Control Variables…………………………………………………. 36 2.3.6. Estimation Methods………………………………………………. 38

2.4. Results………………………………………………………………………. 40 2.5. Discussion…………………………………………………………………... 47

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2.5.1. Implications and Future Research………………………………… 52

Chapter 3 – ORGANIZATIONAL POLITICAL IDEOLOGY AND BUSINESS UNIT DIVESTITURES………………………………………………………………………... 54

3.1. Firm as an Internal Market vs. a Cooperative social entity………………… 59 3.2. Theory and Hypothesis Development………………………………………. 62

3.2.1. Organizational Ideology And Business Unit Divestitures In Response to Poor Firm Performance……………………………... 64

3.2.2. The Moderating Effect of Ownership Dispersion………………… 67 3.2.3. The Moderating Effect of Relatedness in firm’s portfolio. 68 3.2.4. Organizational Ideology and Selection of Buyers for Divested

Business Units……………………………………………………. 69 3.2.5. Organizational Ideology and Post-divestiture Firm Performance…72

3.3. Methodology………………………………………………………………... 73

3.3.1. Sample…………………………………………………………….. 73 3.3.2. Dependent Variables……………………………………………… 74 3.3.3. Independent and Moderator Variables……………………………. 75 3.3.4. Control Variables…………………………………………………. 76 3.3.5. Estimation Methods………………………………………………. 77

3.4. Results………………………………………………………………………. 78 3.5. Discussion…………………………………………………………………... 82

3.5.1. Implications and Future Research………………………………… 85

Chapter 4 – DISCUSSION AND CONCLUSION……………………………………… 88

4.1. Broad Overview of Findings………………………………………………... 88 4.2. Future Research Direction…………………………………………………...90 4.3. Conclusion…………………………………………………………………...94

References 95 Appendix A. Tables……………………………………………….…………………… 109 Appendix B. Figures…………………………………………………………………… 119 Appendix C. Examples of Articles Coded as Concessions…………………………….. 129 Appendix D. Examples of Articles Coded as Pro-social Claims………………………. 130 Appendix E. Frequency of Different Types of Stakeholders..…………………………. 131

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LIST OF FIGURES

Figure 1: Number of Activist Protests Experienced by Firms that were protested at

least once……………………………...……………………………........... 119

Figure 2: Number of Protests Per Year……………………………...………………. 119

Figure 3: Organizational Liberalism Index……………………………...................... 120

Figure 4: CEO Liberalism Index……………………………...................................... 120

Figure 5: The Effect of Organizational Liberalism on Firms’ likelihood of being

targeted by activists……………………………...………………………... 121

Figure 6: The Effect of Organizational Liberalism on Firms’ Deployment of Prosocial

Claims……………………………...……………………………................ 122

Figure 7: The Moderating Effect of Secondary Stakeholder Protest on the association

between Organizational Liberalism and Corporate Concessions…………. 123

Figure 8: The Effect of Primary and Secondary Stakeholder Protest on Liberal and

Conservative Firms’ CSR based responses to activism…………………... 124

Figure 9: Number of Divestitures for firms that divested at least once……………... 125

Figure 10: Number of Divestitures Per Year during the study window……………… 125

Figure 11: Number of Divestitures Across Industrial Sectors………………………... 126

Figure 12: The Moderating Effect of Organizational Liberalism on the Relationship

between Underperformance and Business Unit Divestiture…………...... 127

Figure 13: The Moderating Effect of Organizational Liberalism on Underperformance–

Divestiture relationship – under conditions of Low and High Relatedness in

Firm’s Portfolio……………………………...……………………………. 128

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LIST OF TABLES

Table 1: Correlations and Descriptive Statistics for Activist Protest Analyses (protest-

event level) ……………………………...……………………………....... 109

Table 2: Correlations and Descriptive Statistics for Activist Protest Analyses (firm-

year level) ……………………………...……………………………......... 116

Table 3: Probit Models Predicting Likelihood of Protest Against Fortune 500

Corporations……………………………...……………………………...... 111

Table 4: Probit Models Predicting Corporate Concessions to Activist Demands….. 112

Table 5: Poisson Models Predicting Corporate Deployment of Prosocial Claims…. 113

Table 6: OLS Models Predicting Changes in CSR Profile…………………………. 114

Table 7: Correlations and Descriptive Statistics for Divestiture Analysis (firm-year

level) ……………………………...……………………………................. 115

Table 8: Correlations and Descriptive Statistics for Divestiture Analysis (Completed

Divestiture Deals) ……………………………...…………………………. 115

Table 9: Probit Models Predicting Likelihood of Business Unit Divestitures……... 116

Table 10: Probit Models Predicting Choice of Types of Buyer for Completed

Divestiture Deals……………………………...…………………………... 117

Table 11: OLS Models Predicting Post-Divestiture Performance……………………. 118

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ACKNOWLEDGEMENTS

I owe the successful completion of my doctoral degree to many people who have directly and

indirectly contributed to making it possible. Here, I would like to thank those who have played

the most central roles.

First and foremost, I would like to thank Forrest Briscoe, my advisor, and friend, whose

contribution to my doctoral education is beyond measure. Forrest is a brilliant scholar, a very

patient and caring human being, and – as I have come to know – an outstanding mentor. Forrest,

thank you for granting me the unique privilege of being your student.

A big thank you to Don Hambrick. I feel very fortunate to have benefitted from Don’s

tremendous experience, wisdom, and warmth. His optimism, an ability to sift good ideas from the

mountain of chaff, and work ethic are unmatched and make him a great role model for all

academics.

I feel a deep sense of gratitude to many other professors at Penn State, who have helped

me navigate through my Ph.D. journey. Barbara Gray, thank you for admitting me to the

wonderful M&O community, and for your fascinating qualitative research methods class. Linda

Trevino, thank you for always being highly developmental and kind to me. Srikanth, Vilmos,

Lance, Jon, and Stephen, thank you for always being available, and offering your thoughtful

advice on any and all matters. John McCarthy, thank you for admitting me to your wonderful

community of social movement scholars.

I am indebted toward several other members of M&O community who have made this

journey easy and enjoyable. Shubha Patvardhan, thank you for being the source of great wisdom,

love and care. Without you, my Ph.D. journey would have been so much more difficult, and so

much less enjoyable. Kisha and Sungwon, thank you for being my cohort-mates and friends.

Sharing dilemmas, anxieties and laughs with you through these years has made this challenging

process so much easier and so much fun. I thank Abhijith Acharya, MK Chin, and Chad Murphy

for giving useful advice, hope, and confidence at every stage in the Ph.D. program. My deepest

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gratitude to my dear friend and office-mate, Thinley Tharchen, who super-generously welcomed

me to stay at his home during the last two years of the program. My sincere thanks to all the staff

members, most notably – Holly Packard, Tena Ishler, and Nicole Force – for frequently bailing

me out on many an administrative front. I will miss you all.

I also owe my educational success to my family and friends, who have enabled me to

pursue my dreams and ambitions by consistently providing love and support. Here, I would like

to remember my late grandparents, Taravali and C.B.L. Gupta, who loved me unconditionally and

instilled in me the values that make my life meaningful each day. I thank my parents, Kapila and

Abhay Kumar Gupta, who have always placed my happiness before their own, and constantly

worked toward creating conditions for my success. I am grateful to have Anubhav Gupta as my

brother, whose presence in my life has given tremendous happiness, joy, and comfort. I feel

blessed to have been born in a family such as mine, and wouldn’t trade it for anything. Among

my extended family, I am very thankful to Preeti Sayeed, my mother-in-law, who has given me

immense love and support during the last eight years, and to my aunts and uncles, Jayashree,

Jagat, Kristine, and Ajaya Kumar Gupta, who have not only provided encouragement and help

during my higher education, but have served as great role models throughout my life. I am

grateful to my dearest friends, Rohan Kumar, Shankey Bansal, and Mohammad Raza, who have

risen to help me with my research on many occasions. I thank Vishal Gupta and Anup Singh, who

crucially helped me when I was applying for Ph.D. programs.

Above all, I am so thankful to Misha Mariam, my life companion. Her love,

encouragement, sacrifice, and sheer presence in my life have not only made the pursuit of a

doctoral degree possible, but worthwhile. I dedicate this Ph.D. to her.

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Chapter 1

INTRODUCTION

Organizations are often known to have deeply embedded ideologies or “coherent sets of

beliefs that bind people together and explain their worlds” (Beyer, 1981: 166). Focusing

on one notably salient dimension of ideology, political liberalism vs. conservatism, I

argue that some companies are clearly more liberal or conservative than others.

Transcending the economic interests of the organization and personal values of its

leaders, firms’ ideological orientations may give rise to a wide variety of organizational

decisions. Using a novel measurement of organizational political ideology (which I will

also refer to as organizational ideology) based on political donations by the

organizational members, this dissertation aims to study the effects of ideology on two

strategic decisions that are not only highly consequential for the organizations, but also

important for the larger society that is increasingly affected by organizational actions.

The first essay examines how organizational ideology influences a key non-

market behavior of firms - how they respond to the activist protest. Drawing from prior

research documenting that ideology guides preferences about shared vs. personal

responsibility, I anticipate that ideology will affect whether a firm responds to activist

protest with substantive changes in its practices and behavior or with tactical responses

geared toward impression management. I further posit that activists will pay attention to

these variations in organizational ideologies and target certain companies more frequently

than others. The second essay investigates the ideological underpinnings of a

fundamentally strategic market behavior - business unit divestitures. Building on prior

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research that suggests that ideology shapes managers’ views about appropriate modes of

organizing, I propose that ideology will affect the prevailing conception of the firm as a

cooperative social entity in which value creation happens created through collective

efforts by entities within the firm, or an internal market in which value creation involves

competition and individualistic action. I propose that these underlying differences in

conception of the firm will be reflected in whether a firm divests its business units after

experiencing spells of underperformance, whom the business units are sold to, and how

well does the firm perform after divestitures. Together, these empirical studies will

expand scholarly understanding of the firms’ market and non-market behavior and

explicate ideological bases of firm strategy.

1.1. Theoretical Background

The concept of ideology has provoked fertile debates among social scientists, who have

sought to understand the nature and function of various ideologies in society. Marx and

Engels (1976) viewed ideology in a pejorative sense - as a discourse purported to

legitimate the authority of those in power, and to maintain the societal status quo (Marx

and Engels, 1976; Bendix, 1956). In contrast, many recent researchers have adopted a

neutral stance, acknowledging the philosophical and psychological bases of all ideologies

(Wilson, 1973; Beyer, Dunbar, and Meyer, 1988; Fine and Sandstrom, 1993). In this

view, ideologies comprise a set of over-arching beliefs:

“about the social world and how it operates, containing statements about the rightness of certain social arrangements and what actions would be undertaken in the light of those statements. An ideology is both a cognitive map of sets of expectations and a scale of values in which standards and imperatives are

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proclaimed. Ideology thus serves both as a clue to understanding and as a guide to action, developing in the minds of its adherents an image of the process by which desired changes can best be achieved.” (Wilson's, 1973: 91-92)

Political ideologies coalesce in the form of competing arrangements for the society at

large that seem equally plausible to their adherents in a given time and context. For

example, proponents of the opposing ideologies of socialism and capitalism offer

contrasting views on how to best organize the society, and which societal outcomes

should be valued. For their adherents, relatively consistent worldviews offered by

ideologies serve to reduce uncertainty, maintain predictability, and provide the basis for

social cohesion (Jost, Nosek and Gosling, 2008). The relative consistency of ideologies

and the associated values and beliefs motivate adherents to set aside their idiosyncratic

preferences and work toward shared ideals.

Ideologies may exist at various levels in the society. Beyer (1981) described the

nested structure of ideologies at the societal, organizational and individual level. As I will

discuss later in this chapter, scholars have also conceptualized ideologies in many ways.

Some countries are known to be more capitalistic in their values, norms, and practices

while many others are known to display more socialistic tendencies. Similarly,

individuals, including corporate elites, vary considerably in their ideologies. For example,

Henry Ford, the founder of Ford Motors, was widely known to be an advocate of liberal

ideology (Lewis, 1976), whereas Andrew Carnegie, the founder of Carnegie Steel

company, supported the ideology of laissez-faire capitalism (Carnegie, 1920). While a

large body of research has examined the role of political ideologies at the individual and

the societal level, the idea that some business organizations too have deeply embedded

political ideologies has received conspicuously little research attention. This lack of

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attention toward organizational ideologies becomes particularly striking in light of

organizations’ growing prominence in industrial societies (Perrow, 1991). Indeed,

ideologies of organizations may be highly consequential as organizations represent

powerful “structural vehicles” through which social values are pursued (Selznick, 1949).

Organizational ideologies may not merely confine to shaping the modes of economic

interactions within firms, but play a pivotal role in shaping national and global debates on

critical issues, such as climate change, poverty, and trade.

While prior research has often conflated organizational ideologies with

organizational culture (Pettigrew, 1979; Weiss and Miller, 1988), these two constructs are

distinct in at least three notable ways. First, organizational culture comprises of shared

assumptions, beliefs and expectations that define appropriate behavior within an

organization (Schein, 1985, 1988; Fiol, 1991; Chatman et al., 2014), whereas

organizational ideology represents a constellation of beliefs about the how the society at

large functions. Second, due to the multiplicity of value themes in an organization’s

culture (O’Reilly, Chatman, and Caldwell, 1991), each organization tends to have its

unique culture. In contrast, ideology is a non-distinctive attribute of organizations, such

that many organizations may have an identical ideological stance (Simons and Ingram,

1997; Barnett and Woywode, 2004; Vermeulen, 2013). Lastly, while culture is “invented,

discovered, or developed by a given group.” (Schein, 1988: 7), organizational ideology

may primarily come about on account of the selection of ideological similar members, as

adult employees’ ideologies tend to be highly immune to changes (Sears and Funk,

1999).

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The concept of organizational ideology offers the promise of advancing research

by complementing existing theories of organizational behavior, which have viewed

organizations either as reflections of their environment (Hannan and Freeman, 1984;

DiMaggio and Powell, 1983) or as reflections of their leaders (Hambrick and Mason,

1984). Organizational ideology holds the potential to advance the perspective of

organizations as reflections of their larger body politic, including “lower echelons”.

1.2. Organizational Ideology on Political Liberalism-Conservatism Axis

Depending on the context, ideologies can acquire many different forms, such as

socialism, capitalism, fascism, communism, and anarchism. Typically situated within the

context of the United States, research in political psychology and political science has

viewed the liberalism-conservatism dimension to be the most useful conceptualization of

ideological belief systems that allows parsimonious predictions on many fronts (Jost,

Nosek and Gosling, 2008; Haidt, Graham and Joseph, 2009; Poole and Rosenthal, 1984).

Political psychologists have consistently found support for liberal-conservative ideologies

in predicting a number of individual preferences and behavior, ranging from Poetry and

religion to different models of healthcare (Jost, 2006; Jost et al., 2008). Similarly,

political scientists have deemed liberal-conservative ideologies to be highly pertinent for

explaining societal level policy-making and decisions, ranging from congressional voting

(Conover and Feldman, 1981; Poole and Rosenthal, 1984) to selection of court judges

(Bonica and Sen, 2014). Given my interest in studying the behavior of US public

corporations, I propose that political liberalism-conservatism continuum may also allow

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for a useful and parsimonious conceptualization of organizational ideologies, allowing

the systematic study of numerous corporate behaviors.

Anecdotal support for the liberal-conservative ideologies of US public

corporations can be readily found in the popular press. Based on their support and

resistance toward social and environmental issues, some companies are clearly believed

to be politically liberal than others, which are far more conservative (Carr, 2010). Major

corporations like Johnson and Johnson, Starbucks and Walt Disney are widely viewed as

highly liberal companies, reflected in their stance in favor of marriage equality, pro-

choice and gun-control, whereas corporations like Chick-fil-A, Hobby Lobby, Caterpillar

and Dick’s Sporting Goods are widely recognized as conservative, consistent with their

open support for lower taxation, fewer regulations, right to bear arms, heterosexual

definition of marriage and pro-life legislation (Sims, 2014).

As such, liberal and conservative ideologies reflect differences in individuals’

psychological tendencies. A number of studies have shown that adherents of liberal

ideology and conservative ideology differ in at least three core psychological preferences:

1) preference for equality vs. acceptance of inequality; 2) preference for shared/collective

responsibility for actions and outcomes, vs. preference for personal/individual

responsibility; 3) predilection for continuous social change vs. preservation of societal

status quo. These underlying ideological differences among individuals may over time

manifest themselves in organizational ideologies and fundamentally shape behaviors and

practices in corporations.

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Before I consider the effects of ideology, it is important to elaborate how firms

may come to embody distinct ideologies. Clearly, some firms may inherit their

ideological leanings from their founder (Beyer, 1981). During the formative stage of a

firm’s existence, as the founder recruits other participants and devises organizational

mission and policies, organizational ideology may become a close manifestation of

founder’s personal beliefs. For many firms, those early ideological tendencies may show

resilience over time as organizations goes through cycles of successes, environmental

jolts, mergers and acquisitions, and most importantly, through evolutionary processes that

may reproduce and fortify the dominant ideology of the firm. Although some factors may

cause a shift in ideologies, organizational ideologies are likely to endure through the

processes of attraction-selection-attrition (ASA), as elaborated by Schneider (1987). A

swath of research on ASA processes has shown that the employees are attracted to and

remain in organizations that resemble their leanings (Chatman, 1991; Giberson, Resick

and Dickson, 2005). In situations where employees’ leanings are at odd with those of

their employers, some employees may adapt to the dominant organizational ideology,

while others may leave, voluntarily or involuntarily (Sheridan, 1992). These evolutionary

processes have the potential to give rise to distinct political ideologies in many

organizations, nudging firms’ practices and structures in the direction of the dominant

ideology (Schneider, 1987).

Even though attraction-selection-attrition processes may unfold in all

organizations, the resulting ideological homogenization will rarely be uniform and

totalistic. While relatively complete ideological homogenization may be present in some

politically oriented organizations, such as the Greenpeace and the Christian Coalition of

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America, most for-profit organizations will only have partial homogeneity, which may

still suffice to nudge the overall ideological leaning of the firm one way or the other.

Indeed, a glance at the landscape of corporate America suggests that while some

organizations are distinctly ideological and assert their ideologies by taking a position on

societal issues, many firms are ideologically moderate. It is intriguing to consider that

such ideological moderation may also have its distinct influences on firm behavior, which

represent an important avenue for future research.

Research in political psychology and organizational behavior has shown that

liberal ideology supports a model of governance in which firms must balance the interests

of multiple constituencies whereas conservative ideology supports upholding free market

principles with shareholder-value maximization as the primary goal of the firms (Tetlock,

2000; Jost, 2006). Liberals and conservatives also differ in the extent to which they state

preference for individual accountability, in which actors are held responsible for their

fate, or shared accountability, in which emphasis is placed on achieving superior

performance through collective efforts (Tetlock et al., 2014).

1.3. Mechanisms

Decision-making within organizations involves extensive negotiation of values

and interests among multiple entities. While the top executives are adorned with high

power and status, they rely on subordinates for expert advice on many technical and

social aspects of their decisions. Indeed, as the decision-makers deliberate on numerous

choices and decisions whose merits remain uncertain, they engage in collective sense-

making to ensure that their decisions meet the standards of efficacy and appropriateness

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(Weick, 1995; March and Olsen, 2006). This distributed decision-making sometimes

takes place behind closed doors of the executive suites and become part of the

organizational politics (Eisenhardt and Schoonhoven, 1990). In other cases, top

executives explicitly create an “internal selection environment” in which actors from

multiple levels in the organization take part to arrive at decisions that are widely

acceptable (Burgelman, 1983). In this layered and distributed decision-making process,

organizational ideology may become infused into firms’ market and non-market

behaviors through two operating mechanisms.

First is the mechanism of “motivated cognition” which is known to shape

individuals’ reasoning in a way that leads them to perceive rational merits in choices,

decisions and alternatives that are congruent with their values and beliefs (Higgins and

Molden, 2003). In this process, actors across layers of firm hierarchy infuse their personal

ideologies into suggestions, proposals and requests that they submit for senior

management’s consideration, effectively constraining their set of choices in the direction

of the prevailing beliefs in the firm. As a result, decision-makers in the liberal firms,

regardless of their personal views, will be presented with courses of action that resemble

liberal values and beliefs (Bansal, 2003), such as protection of workers’ rights, and

minimizing harm to the natural environment. Similarly, decision-makers in the

conservative firms will be presented with courses of action that are in sync with their

conservative beliefs, such as focusing exclusively on the bottom line.

As a second process, the decision-makers may enact a “logic of appropriateness”,

which will urge them to act in conformance with the prevailing norms and expectations

of the collectivity, even if they do not share or agree with those values. This process

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points to the reality that decision-making often does not involve anticipation and

evaluation of future consequences, but rather involves decision-makers’ assessment of

the contextual appropriateness of their actions (March and Olsen, 2006). As a result, even

conservative decision-makers in liberal firms may act per the prevailing beliefs

associated with liberal ideology and vice versa.

In this dissertation, I explore the role of ideology in bringing about differences in

two major types of firm behavior. In the first essay, I examine how organizational

ideology may give rise to varying responses to protest by the activists. In the second

essay, I examine the role of ideology in shaping the dominant conception of the firm, as

manifested in firms’ willingness to divest their business units in response to

underperformance, their choice of buyers for divested units, and their post-divestiture

performance. Together, these essays aim to answer the following research questions:

1.4. Research Questions

1. How does organizational ideology shape corporate responses to activist protest?

2. How does organizational ideology affect the corporate decision to divest their

businesses?

1.5. Dissertation Overview

This dissertation is organized as follows. The first essay explores the effects of

ideology on firms’ responses to activist protest. Building on prior work that has examined

the effects of activism on organizations (King and Soule, 2007; King, 2008; Briscoe and

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Safford, 2008; Hiatt, Since and Tolbert, 2009; Zhang and Luo, 2013; McDonnell and

King, 2013), I explore the effects of organizational ideology in engendering different

responses to activism. In contrast to prior research that has largely examined the role of

external factors in explaining the responses of target firms, I anticipate that a more liberal

ideology will make companies inherently more or less receptive to activists’ concerns. I

hypothesize that organizational liberalism will heighten firms’ propensity to concede to

activist demands, whereas conservatism (or lower liberalism) will increase firms’ reliance

on impression-management based responses, including advancing of pro-social claims

and improving corporate social responsibility profile. Additionally, I hypothesize that

both conservative and liberal firms will be more often targeted by activists than

ideologically moderate firms as the latter neither show the promise of victory nor provide

mobilization opportunity by spotlighting firms’ hostility toward stakeholder concerns.

The second essay examines the effect of organizational ideology on firms’

business unit divestiture activity. Building on prior work that has provided initial

evidence about the ideological underpinnings of firms’ strategic activities (Gupta,

Briscoe and Hambrick, 2014), I theorize that firms’ ideology may engender distinct

conceptions of the firm – as an ‘internal market’ or a ‘cooperative social entity’ – shaping

the extent to which decision-makers view their business units as distinct entities

responsible for their fate, or interdependent entities that create value through collective

actions, and shared knowledge and routines. I begin with the hypothesis that the more

liberal firms will exhibit a lower propensity to divest their businesses as a response to

poor firm performance than the more conservative firms. Further, I propose that the

attenuating effect of organizational liberalism on underperformance-divestiture

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relationship will the strengthened when a firm’s ownership is relatively dispersed,

affording managers more decision-making latitude, and when a firm’s portfolio of

businesses shows less relatedness, providing occasions for ideology to have a discernible

effect. Extending these ideas, I propose that organizational ideology will not only affect

firms’ decision to divest a business unit, but also affect the choice of buyer for the

divested unit, such that the liberal firms will be more likely to divest business units to

firms outside of the industry and less likely to divest to private equity firms. Lastly, I

propose that liberal firms’ greater concern for social and human costs involved in the

divestiture of business units will lead them to obtain greater returns from completed

divestiture deals.

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Chapter 2

ORGANIZATIONAL POLITICAL IDEOLOGY AND CORPORATE

RESPONSES TO ACTIVIST PROTEST

As non-owner stakeholders of the firm, social activists often aim to push

significant changes in corporate practices, processes and structures of the targeted firms

(McCarthy and Zald, 1977; King, 2008; Briscoe and Safford, 2008; Weber, Rao, and

Thomas, 2009; Bartley and Child, 2011). For example, Greenpeace, a climate-change

advocacy organization, frequently organizes protests against major retailers, such as

Target and Trader Joe’s, to promote sustainable supply chain practices (Greenpeace,

2010). In this process, corporations are typically viewed as closed entities that exhibit

resistance to influence by outside constituents, and respond only when the costs of

inaction become very high (Weber, Rao and Thomas, 2009).

This line of thought has received support from multiple domains in organizational

research. For instance, scholars in social movement theory have argued that the activists’

influence depends on their capacity to disrupt firm’s resources and reputations (King and

Soule, 2007; King, 2008; Ingram, Yue and Rao, 2010). Stakeholder theorists have

emphasized that activists can influence firms when they succeed in imposing costs,

financial and reputational, on target firms (Eesley and Lenox, 2006). Scholars in non-

market strategy have also depicted the interaction between activists and corporations as a

rational process of cost-benefit optimization, in which activists consider their chances of

mounting credible threat to organizational targets, and corporate decision-makers

! 14!

consider activists’ capacity to threaten firm’s resources (Baron, 2001; Baron and

Diermeier, 2007).

A growing body of research in organizational theory and strategy advances an

alternative perspective suggesting that interior attributes of organizations may predict

their engagement with stakeholder issues. As such, political ideologies of companies and

their executives have been shown to both exert a systemic influence on firms’ openness

toward stakeholder issues (Chin, Hambrick and Trevino, 2012; Gupta, Briscoe and

Hambrick, 2014), and supply encouragement for activists to push for changes (Briscoe,

Chin and Hambrick, 2014). In contrast to prior research that has invoked tangible costs

and benefits as mechanisms of stakeholder influence, the effect of political ideologies

operates through shaping decision-makers’ perceived costs and benefits, and normative

pressures from the larger body politic of the firm (Gupta et al., 2014). Despite their

shared interest in unpacking the role of activists in organizational changes, scholarship in

these areas continues to be fraught with at least three significant limitations, providing

motivation for this study.

First, while researchers have demonstrated that political ideologies of

corporations and leaders may render corporations more receptive to social issues that may

further the interests of stakeholders (Chin et al., 2012; Briscoe et al., 2014; Gupta et al.,

2015), in their conceptual and empirical analyses, they have stopped short of considering

who the claimants really are, and whether liberal and conservative corporations

systematically differ in how they respond to claimants’ specific demands. Given that

corporate actions are frequently decoupled from their advertised goals (Meyer and

Rowan, 1977), the actual effects of organizational political ideology for firm’s social

! 15!

engagements can only be inferred meaningfully by investigating firm’s responses to

concrete demands of stakeholders.

Second, it seems fair to say that existing research on political ideology offers an

oversimplified portrayal of how it shapes firm’s propensity to engage in stakeholder

issues. Depicting a simple linear effect of liberalism, studies suggest that the liberal

ideology renders companies more open to social issues (Chin et al., 2012; Gupta et al.,

2015) and, symmetrically, provides cues for activists to call for change in organizational

practices (Briscoe et al., 2014). Providing a useful initial step toward unpacking the role

of political ideology, this research opens up opportunities to consider two key questions:

1) how do conservative firms, who resist stakeholder concerns, respond to activist

protest; 2) and whether firm’s deviation from liberal ideology may also supply motivation

for activism. These questions are specially pertinent as scholars and media observers

have noted that activists often target conservative companies, such as ExxonMobil,

Walmart and Chik-fil-A (Ingram, Yue and Rao, 2010; France-Presse, 2012; Cessna,

2013), which, in turn, tout their commitments to social causes (Nyong, 2013; Skjærseth,

2003), suggesting that the effects of political ideology may be non-linear, and more

complicated.

Last but not the least, existing research has primarily adopted a piecemeal

approach to scholarship on social movements and organizations. While researchers have

widely acknowledged and empirically accounted for the possibility that the factors that

affect where and when activism emerges, are intertwined with how organizations respond

to activism (Ingram, Yue and Rao, 2010; Briscoe and Safford, 2008; McDonnell and

King, 2013), very few studies have actually tried to understand the factors that may affect

! 16!

both the targeting calculus of activists, and the response calculus of corporate decision-

makers (McDonnell, King and Soule, 2015)

This study aims to address these limitations by 1) examining the role of

organizational political ideology in shaping corporate responses to activism or

stakeholder protest; 2) considering how political ideology may influence a repertoire of

strategic responses that corporations may deploy to overcome the threat posed by

activists; 3) jointly analyzing organizational political ideology both as an influencing

factor in corporate decision-making, and as a crucial element underlying activists’

targeting calculus.

I theorize that the positive effect of liberalism on firm’s social activities as

demonstrated in prior research (Chin et al., 2012; Gupta et al., 2015) will extend to firm’s

openness toward activism, such that liberal firms will exhibit a greater likelihood of

conceding to activist demands. However, I propose that the lack of liberalism (high

conservatism) will, instead of producing inertness, give rise to other distinct strategic

responses. While social movement research has traditionally focused on concessions by

the target firm that represent unqualified success of movement, recently scholars have

argued for considering an entire repertoire of organizational responses (Soule, 2012). I

propose that organizational conservatism will increase firms’ likelihood of engaging in

impression-management tactics (McDonnell and King, 2013). As part of their

impression-management repertoire, I consider that firms may use their externally oriented

communicative efforts, and internal adjustments to CSR practices to advance positive

images to their myriad constituents. Upon experiencing activism, I anticipate that the

conservative firms will show greater increases in the frequency of pro-social claims, and

! 17!

the CSR practices than the liberal firms. Further, I theorize that the effects of

organizational political ideology on firms’ responses to activism will be contingent on the

nature of activism. Specifically, I propose that the effect of organizational conservatism

on all three types of firm responses considered in this study will be amplified when

activists are secondary stakeholders with relatively less immediate salience and threat to

decision-makers.

Finally, I propose a theory of how organizational ideology will also be a key

component of activists’ calculus of deciding where to target their strategic efforts.

Existing theories of activist targeting have relied on “opportunity structure” as the main

theoretical construct, which suggests that activists choose targets based on where they

perceive a higher likelihood of winning (Briscoe, Chin and Hambrick, 2014). I propose

that while activists’ targeting calculus may certainly include an assessment of their

chances of success, the multiplicity of activist goals and decision criteria may render the

process more complicated (Bartley and Child, 2014). I anticipate that activists’ targeting

modus operandi will not only reflect their assessment of chances of wins, but also

perceived potential to energize movement participants and bystanders by spotlighting

corporate hostility, resulting in a curvilinear effect of organizational liberalism on firms’

likelihood of being targeted. In particular, I expect that the highly liberal firms, due to

perceived openness, and the highly conservative firms, due to perceived resistance, will

experience more activist targeting than the ideologically moderate firms.

! 18!

2.1. Background On Organizational Responses To Activism

While social movement scholars have traditionally focused on effects of social

movements on the state and the public policy, much progress has been made in recent

years in understanding the effects of activist actions on organizational targets (Walker,

Martin and McCarthy, 2008). These include corporations (King and Soule, 2007),

universities (Lounsbury, 2001) and hospitals (Kellogg, 2009). As organizations have

gained prominence in the industrial world (Perrow, 2001), activists have taken a notable

interest in affecting social change by targeting organizations (King and Pearce, 2010).

Public corporations are in particular viewed as attractive targets of movements as they

can not only affect change directly through their policies, but can also provide prominent

platforms for widespread change in the society (Briscoe and Safford, 2008; Walker,

Martin and McCarthy, 2008; King and Pearce, 2010).

For corporations, activists represent non-owner stakeholders who lack access to

institutionalized channels of influence and can only “voice” their grievance to attain

changes in targeted corporations (Hirschman, 1970). Because corporations have very

limited legal responsibility toward non-owner stakeholders, activists often resort to extra-

institutional tactics, such as protest, to create avenues of change (King and Soule, 2007;

Walker, Martin and McCarthy, 2008). Conventional wisdom suggests that it is only when

corporate decision-makers experience potentially costly activism that they are brought to

the bargaining table to consider activist demands.

Corporations are often known to resist activist pressures as capitulations to their

demands can be equated with an admittance of guilt, potentially leading to negative

publicity. Activists are known to succeed only when they are able to create perceptions of

! 19!

threat through their strategic efforts, such as mobilization of bystanders (Rao and Dutta,

2012), garnering media attention (Ryan, 1991), use of disruptive tactics (Luders, 2006),

and targeting organizations during opportune conditions, such as periods of performance

and reputational declines (King, 2008). The theorized mechanisms for these effects focus

exclusively on the movement’s power and capacity to threaten, in effect asserting that the

organizations capitulate only after incurring costs to resistance.

At the same time, scholars have acknowledged the predictive limits of these

contextual factors in explaining activist success against corporate targets (Giugni, 1998;

Vogel, 2005; Bartley and Child, 2011). To develop a nuanced understanding of the

corporate responses to activism, researchers have advocated for paying closer attention to

internal aspects of the corporate targets that may affect their openness to activist claim

(Baron and Diermeier, 2007; McDonnell, King and Soule, 2015). While existing research

has mainly emphasized the transitory contextual factors that temporarily increase

corporations’ vulnerability to movement’s influence, the seldom-noted reality remains

that some organizations are intrinsically more receptive toward activists (Briscoe and

Safford, 2008), in the sense that they exhibit willingness to integrate activist inputs into

their internal routines (McDonnell, King and Soule, 2015). Although studies under the

rubric of political mediation model have offered the insight that target’s “openness”

affects movement’s influence (Amenta et al., 1992; Cress and Snow, 2000), scholars are

yet to examine which factors, in the corporate context, contribute to organizational

openness to activist driven change. In this study, I propose that organizational ideology, a

relatively enduring attribute of corporations, may both shape firms’ responses to activist

protest, and affect activists’ choice of targets of protest.

! 20!

2.2. Theory and Hypothesis Development

Prior research has reaffirmed the importance of organizational political ideology –

defined as the values and beliefs about “how the social world operates, including ideas

about what outcomes are desirable and how they can best be achieved” (Simons and

Ingram, 1997: 748) for strategic decision-making. Ideology is known to shape

organizational decisions, particularly during periods of crisis and change (Meyer, 1982),

by making certain choices appear more attractive and “appropriate” to decision-makers

(March and Olsen, 1995, 2006). Recently, Gupta, Briscoe and Hambrick, (2014) have

argued for conceptualizing organizational political ideology on the classic liberalism-

conservatism axis and demonstrated its predictive ability for various progressive practices

of corporations. Drawing from prior research that has shown the relevance of ideologies

of liberalism and conservatism for influencing the extent to which managers prefer to

incorporate stakeholders’ interests in firm’s decision-making (Tetlock, 2000), the present

study, for the first time, examines the effects of organizational political ideology

(hereafter organizational ideology, for ease of exposition) on corporate responses to

protest by social activists.

2.2.1. Organizational Ideology and Concessions to Social Activists

Organizational ideology may fundamentally shape the nature of firms’ interaction

with activists who constitute a type of non-owner stakeholder with constrained access to

institutionalized channels of influence on firm’s decision-making. As argued earlier in

this dissertation, ideologies of liberalism and conservative may help explain the different

! 21!

stakeholder management approaches of a firm. While a conservative firm may give

primacy to profitability and shareholder value maximization, a liberal firm may take a

more expansive view of its responsibility toward multiple constituencies and perceive

stakeholder engagement as an instrumental act that will create long-term value for the

firm (Tetlock, 2000). I argue that this distinction has crucial implications for the social

movement theory that seems to have assumed conservatism as a universal attribute of the

firms. As such, scholars seem to have theorized threat to organizational performance as

an almost exclusive means of gaining concessions. Despite compelling arguments for

“persuasion” as a complementary pathway to movement success (Gamson, 1968), and

accumulation of findings for movement success through non-disruptive means (Rojas,

2006; Hiatt, Sine, and Tolbert, 2009; Briscoe, Gupta, and Anner, 2015), social movement

researchers have not identified the factors that may affect firms’ relative openness to

activism.

Research suggests that ideology is a significant predictor of people’s preferences

for different models of corporate governance (Tetlock, 2000). On one hand, conservative

ideology is associated with a stringent view that the shareholder profit generation should

be the singular goal of corporations, and allocation of resources for any other purposes

amounts to socialism – a view that has been echoed by several prominent scholars (e.g.

Friedman, 1970; Jensen and Meckling, 1976). On the other hand, a liberal ideology

supports a more pluralistic regime in which decision-makers should attempt to balance

the contradictory demands of various stakeholder constituencies in the organization’s

environment – an opposing view often articulated in stakeholder theory (e.g. Freeman,

1984; Donaldson and Preston, 1995; Clarkson, 1995).

! 22!

Organizational ideology may affect decision-making through two interconnected

mechanisms shaping decision-makers views about the importance of incorporating

stakeholder’s interests in firms’ decisions and practices. First, the social-psychological

process of “motivated cognition” is known to infuse decision-makers’ reasoning with

personal values and beliefs (Kunda, 1990; Higgins and Molden, 2003). This process of

motivated cognition is known to translate political ideologies into decisions by inducing

confidence that actions that align with actors’ worldviews will produce overall better

outcomes (Jost et al., 2003). It allows proponents of the stakeholder perspective and the

shareholder value maximization perspective to have convictions in the economic

superiority of their respective approaches (Bansal, 2003). As a result, in a liberal firm, as

actors across organizational hierarchy imbue their ideology into the proposals and

requests that eventually reach the desk of the senior management, they will nudge the

decision-makers toward prevailing preferences that support a pluralistic governance

regime, which is receptive to the interests of stakeholders. In contrast, since conservative

ideology is aligned with the beliefs that secondary stakeholders’ interests should not be

advanced at the cost of shareholders’ interests, decision-makers in the conservative firms

will be presented with choices that allow them to ignore the concerns of non-owner

stakeholders.

Even though a firm’s ideology may have a direct effect if decision-makers share

that ideology, but the influence may well extend to others through an application of

“logic of appropriateness”, in which decision-makers are known to follow the implicit

values, norms and rules of the organization (March and Olsen, 2006). Because decision-

makers partly derive their legitimacy from others who implement their decisions

! 23!

(Schneiberg and Bartley, 2001), they will likely be mindful of the dominant ideology of

the firm and be compelled to act in accordance with it. As a result, even conservative

decision-makers in a liberal firm will find it fitting to follow the ethos of the organization

and meaningfully engage with activist stakeholders, whereas liberal decision-makers in a

conservative firm will find it logical and expedient to brush aside activists’ demands as

unnecessary distractions. Taken together, I anticipate that these mechanisms will lead the

liberal firms to exhibit a higher propensity to concede to activists’ demands, and

conservative firms to see merit in maintaining status quo. For instance, while well-known

liberal companies, such as Costco and Sears Roebuck & Co., conceded to activist

demands to adopt same-sex partner benefits, prominent conservative companies, such as

ExxonMobil and Domino’s refused to concede and offered financial burden as the

justification for their resistance (Wright, 2003; Keleveld, 2008). Therefore, I offer the

following hypothesis:

Hypothesis 1: Upon experiencing activism, the higher the organizational liberalism, the greater the likelihood that the firm will concede to activists’ demands. When experiencing activist pressures, corporations choose their responses from a

repertoire of options (Oliver, 1991). As strategic actors, corporations articulate their

responses after considering concerns of present day costs and benefits, and future

viability of the firm. While concessions by targeted organizations have been the subject

of most empirical investigations of social movement effects (Eesley and Lenox, 2006;

King, 2008; Lounsbury, 2001), corporations may also deploy other tactical responses as

substitutes or complements to the concessions to activists’ immediate demands. Recent

research on organizations and social movements emphasizes that some companies

! 24!

respond to activism by taking actions to counter activists’ claims (Baron and Diermeier,

2007; McDonnell and King, 2013).

2.2.2. Organizational Ideology and Deployment of Impression Management Tactics

To offset the reputational loss in the eyes of key stakeholders, such as investors,

rating agencies and customers, companies may deploy impression management tactics to

advance a viable image that the firm is already fulfilling its social obligations. Of all the

different approaches that may be accessible to companies, I focus on two specific types

of impression-management responses: 1) Pro-social claims, which represent a type of

external communicative strategy to amplify audiences’ perception of firm’s social

activities; 2) Corporate social responsibility, which enables firms to project an image that

the firm is creating societal good in several domains, and that activist claims about

corporate social irresponsibility are exaggerated.

2.2.2.1. Pro-social Claims

McDonnell and King (2013) found that after being targeted by activists, firms

increase their pro-social claims for a number of activities, such as philanthropy, disaster

relief and social justice to gain reputation, with the aim of creating doubts about the

validity of activists’ claims in the audiences’ minds. Even though both concession-based

and impression management-based responses may be instigated by activist efforts, they

remain conceptually distinct in terms of the underlying goal. While firms might embrace

concessions as part of their larger social strategy to maintain profitability and legitimacy

by minimizing social and environmental harm and maximizing social good, pro-social

! 25!

claims are quintessentially geared toward protecting and extending firms’ discretion with

respect to their environment.

While almost all firms deploy pro-social claims as part of their public relations

efforts, I propose that firm’s reliance on pro-social claims to counter activists’ claims will

vary depending on the ideology of the firm. Specifically, I anticipate that pro-social

claims may emerge as weapons of choice for conservative companies because

conservative ideology supports the view that non-owner stakeholders, such as activists,

are unnecessary distractions from the firm’s primary goal of profit generation (Tetlock,

2000). While liberal firms may embrace substantive responses to social activists as part

of their strategy to maintain harmony with myriad constituents, conservative firms may

perceive value in deploying tactical responses to protect their firm’s reputation and to

invalidate activist claims. As a result, when targeted by activists, tactical routines

embedded in the conservative firms may augment the frequency of pro-social claims to

manage activists’ influence. For instance, United Airlines, a relatively conservative

company in its industry, is widely known to have increased its public relations efforts to

promote itself as a socially responsible company after experiencing protest by employee

activists (Allison, 2004; SumofUs, 2014). Therefore, I offer:

Hypothesis 2: Upon experiencing activism, the lower the organizational liberalism, the greater will be the increase in firm’s deployment of pro-social claims.

2.2.2.2. Corporate Social Responsibility

Firms are increasingly held responsible by stakeholders to deliver on social

metrics, in addition to the financial ones (Weber and Lungeanu, 2013). Corporate social

responsibility (CSR) profiles are used by a number of external actors, including activists,

! 26!

investors, as evidence of whether companies are fulfilling their social obligations (King

and Pearce, 2010; Weber and Lungeanu, 2013). In turn, companies manage their CSR

profiles to project a favorable image to stakeholders (Galaskiewicz, 1997; Bansal and

Roth, 2000; Gehman, 2012). Although a voluminous literature alludes to the idea that

pressures from external environment encourage firms’ to improve their CSR profiles

(Aaronson and Reeves, 2002; David, Bloom, and Hillman, 2007; Marquis, Glynn, and

Davis, 2007), little exists in the way of systematic research that explains changes in CSR

profiles after experiencing activist protest.

Moreover, researchers have struggled to separate “strategic” vs. “social” aspects

of CSR initiatives pursued by firms (Waldman, Siegel, and Javidan, 2006). While a few

studies treat CSR as a form of social engagement (Chin et al., 2012; Gupta et al., 2014), a

large body of research in strategy and finance deems CSR to be a form of public relations

strategy that, if deployed effectively, can improve firm performance. These ideas, while

theoretically compelling, have met with considerable methodological challenges as it is

very difficult to ex-ante decipher the real motives behind firm’s CSR initiatives. Studying

CSR as a response to external pressures by activists, beyond actual corporate concessions

to activist demands (which I examine separately), provides a strategic setting to analyze

the extent to which firms’ CSR engagement may be driven by objectives to advance

greater societal good, versus strategic efforts to advance a positive image to the world.

Especially, I argue that firms’ deployment of CSR after experiencing activist pressures

can be categorized as a strategic effort at impression management.

In this framework of considering change in CSR as a type of corporate response

to activism, I expect organizational ideology to exert its influence, such that certain firms

! 27!

may be more attuned to using CSR profiles as strategic tools to ward off criticism than

others (Fombrun and Shanley, 1990; Sine, Shane, and Gregorio, 2003). I propose that

while decision-makers in liberal companies, due to prevailing beliefs that support a more

expansive responsibility of the firm toward the society (Tetlock, 2000), will see it

efficient and expedient to substantively concede to activists’ demands, the decision-

makers in conservative companies, due to preference for minimizing external threats to

profitability (Tetlock, 2000), will respond to activist pressures by window dressing their

CSR profiles. Therefore, I hypothesize that conservative firms will show a greater spike

in their CSR in response to activist protest than the liberal firms.

Hypothesis 3: Upon experiencing activist protest, the lower the organization’s liberalism, the greater will be its advances in CSR.

2.2.3. The Moderating effects of Stakeholder Type - Primary vs. Secondary

So far, this study has portrayed that organizational ideology will affect firm

responses regardless of the nature of the activism, but the influence of ideology may vary

based on the different types of activists. In the context of governmental policymaking,

target’s openness to change is known to vary depending on whether the activists are

insiders or outsiders (Santoro and McGuire, 1997; Soule et al., 1999). In the corporate

context, an analogous distinction between primary stakeholders and secondary

stakeholders has been deemed important for relative effectiveness of activism (Clarkson,

1995; Eesley and Lenox, 2006; Vasi and King, 2012). Primary stakeholders are defined

as actors who engage in economic transactions with the firms, such as employees,

suppliers and customers, whereas secondary stakeholders are defined as actors who

challenge the organizational status quo as representatives of the larger society, such as

! 28!

environmental activists and advocacy groups (Eesley and Lenox, 2006; Zhang and Luo,

2011). Even though secondary stakeholders may have a lower influence on a firm’s

decision-making than primary stakeholders, I argue that the effectiveness of secondary

stakeholders will be even more contingent on organizational ideology.

The general distinction between primary and secondary stakeholders is relevant

for activists’ success because of the general human tendency to dichotomously categorize

individuals as in-group members and out-group members (Bowlby, 1973; Mikulincer and

Shaver, 2001). In this categorization process, individuals exaggerate relative

homogeneity of member attributes within category and differences among members

across categories (Quattrone and Jones, 1980). The “in-group” comprises of individuals

with whom decision-makers have social contact and relational interdependencies,

whereas “out-group” constitutes of individuals who are socially distant and culturally

unfamiliar to decision-makers. This categorization results in actors’ negative orientation

toward out-group members and positive and favorable orientation toward in-group

members. Although these biases are part of general human tendencies, research in

political psychology has shown that conservatives exhibit greater biases toward out-group

members (Altemeyer, 1998), often explained in terms of preferences for individualism

and meritocracy (Sears et al., 1997; Sidanius, Pratto and Bobo, 1996). Such beliefs may

manifest into a lower receptivity of conservative companies toward secondary

stakeholders. While employees and managers in conservative firms will perceive some

degree of social familiarity and interdependencies with the primary stakeholders, such as

customers, they are likely to perceive low interdependence with the secondary

stakeholders, such as environmental activists. As a result, decision-makers in

! 29!

conservative firms may see some potential benefits in conceding to primary stakeholders’

demands, in the form of higher customer loyalty, employee commitment, etc., while

equating concessions to secondary stakeholders as a compromise of firm performance. In

contrast, decision-makers in liberal firms, owing to prevailing view about firms’

pluralistic responsibility toward all stakeholders, will also see merit in a more

evenhanded treatment of all stakeholders. Thus:

Hypothesis 4a: The more conservative a company, the lower the probability of concessions in response to secondary stakeholder protest, relative to the probability of concession in response to primary stakeholder protest.

Since the nature of activism affects the salience of activism for decision-makers

(Vasi and King, 2010), the distinction of primary vs. secondary stakeholders may also be

relevant for shaping a firm’s ideologically motivated impression-management responses

to activist protest. Since firms’ deployment of impression-management repertoire

depends on the extent to which decision-makers perceive the salience and threat of

activism, decision-makers in conservative firms may have more pronounced proclivities

to deploy strategic efforts to neutralize activism that seems to have some bearing on

firm’s performance and routines, i.e. primary stakeholders. Because of fewer

interdependencies and lack of social contact, secondary stakeholder protest may not only

have weaker effect on conservative firms’ likelihood of concession, but may actually also

have a weaker effect on conservative firms’ engagement in impression-management

tactics, both pro-social claims, and CSR. Thus:

Hypothesis 4b: The more conservative a company, the lower the increase in pro-social claims in response to secondary stakeholder protest, relative to the increase in pro-social claims in response to primary stakeholder protest.

! 30!

Hypothesis 4c: The more conservative a company, the lower the increase in CSR profiles in response to secondary stakeholder protest, relative to the increase in CSR profiles in response to primary stakeholder protest.

2.2.4. Organizational Ideology as Determinant of Activist Selection of Targets

Not only have researchers accorded limited attention to the effects of

organizational ideology on firm’s responses to activist demands, they have also neglected

the possibility that the activists often closely attend to firms’ political leanings as

indicators of their potential openness to activism. Acting as armchair social scientists,

activists choose those targets that indicate a higher possibility of goal attainment (Bartley

and Child, 2014). Yet, the existing literature does not provide a clear prediction regarding

how activist targeting is shaped by the perceived “openness” of potential targets. On one

hand, some studies suggest that activists target companies that signal higher potential of

success, such as sympathetic leadership (Briscoe et al., 2014). On the other hand,

evidence suggests that activists’ may also want to target organizations that appear to be

resistant to stakeholder demands (McDonnell, King and Soule, 2015). Research looking

at the effects of social movements on governmental policy-making suggests that activists

may often select highly resistant targets because naming and shaming of such targets may

provide opportunities to energize bystanders and mobilize support for the activist cause

(Meyer, 1993; Staggenborg, 1991).

Recently, McDonnell, King and Soule (2015) found that corporations’ past

responses to activism predicted the likelihood of future activism in a curvilinear fashion,

such that both the corporations with a record of frequently conceding to activist demands

and corporations with a record of existing activism were more likely to get targeted.

While the study opens inquiry into the question of how targets’ openness matters for

! 31!

activist calculus, they stopped short of considering the organizational source of target’s

openness or resistance. In this study, I propose that organizational ideology may serve as

a firm attribute that indicates to activists whether the firm is a good target for achieving

change or a good platform for spotlighting corporate hostility and rallying support for

their cause. In particular, I propose that activists are likely to target firms with high

liberalism and firms with high conservatism. Organizations that are ideologically

moderate are less likely to get targeted, as they neither indicate the potential for success

nor signal opportunity to energize movement participants. This leads me to the

hypothesis that:

Hypothesis 5: Organizational liberalism will have a curvilinear effect on likelihood of being targeted by activists, such that the firms on either end of the organizational liberalism-conservatism axis will experience more activist targeting than firms that are ideologically moderate.

2.3. METHODOLOGY

2.3.1. Sample

To assess the extent to which corporate responses are affected by the ideology of

the targeted organization, I created a unique dataset of protest events organized against

Fortune 500 corporations during 2001-2013. This study period was appropriate for the

analysis, as the data for organizational ideology indicators is scarcely available for years

prior to 1998. Since Fortune 500 firms experience considerable pressures to deliver

economic returns by shareholders and industry analysts, this sampling approach enables

me to put my ideas to a stringent test.

I collected data on all the protest events against Fortune 500 corporations during

2001-2013 by searching for articles published in the five major US newspapers: New

! 32!

York Times, Washington Post, The Wall Street Journal, the Chicago Tribune and Los

Angeles Times. Research assistants searched for four keywords mentioned anywhere in

the news article: protest, demonstration, rallies, and parades. They went through all the

articles to separate the ones that 1) mention a protest/demonstration/rally/parade event

against one or more clearly identified corporate targets; 2) mention a specific protest

demand for which concession can be made by the target, such as protest to discontinue a

particular product or logo; 3) pertain to protest events targeting at least one American

corporation; 4) clearly specify that the protest event involved more than 1 protester.

Figure 1 describes the number of protests experienced by companies that were protested

at least once during the study window. Figure 2 summarizes the number of protests

during each year in the study window.

2.3.2. Measurement of Organizational Ideology

My research builds on recent work showing that individual political campaign

donations effectively mirror personal political ideology (Francia et al. 2003, 2005;

Ensley, 2009), and that personal ideologies of individuals predict their strategic behaviors

(Chin, Hambrick and Trevino, 2013). My current research extends these ideas by

examining organizational ideologies of Fortune 500 corporations by using a novel and

highly reliable measure based on the aggregation of all political contributions made by

organizational members. In keeping with prior research that suggests that the stances of

the two major parties can be interpreted in conservative-liberal terms (Poole and

Rosenthal, 1984; Dunlap and Allen, 1976), I consider donations to Republican recipients

as reflections of conservative beliefs and donations to Democratic recipients as

! 33!

reflections of liberal beliefs. This approach is consistent with research indicating that

ideological divide (on liberal-conservatism axis) between the Democratic Party and the

Republican Party has increased considerably in the past few decades (McAdam and

Kloos, 2014).

The Federal Election Commission (FEC) stores information on all the political

donations made individuals over $200 or more. These data include information on

donor’s employer, occupation, job title, home address, along with information on

recipient’s name and party. In my measure of organizational ideology, I include all the

donations made to the two major political parties in the US in which donors identified

any of the sampled firms as their employers. To measure organizational ideology, I

exclude CEO’s donations, which are used to construct the control variable for CEO’s

personal ideology.

Following Gupta, Briscoe and Hambrick (2014), I operationalize ideology on the

conservatism-liberalism axis using an index measure based on political donations by

organizational members coded as an average of the two most recent election cycles. I

measure organizational liberalism (lower values represent conservatism) using four items

coded from employee donations: 1) total dollar amount donated to the Democratic Party

divided by the total amount donated to both parties; 2) number of donations to the

Democratic Party, divided by the number of donations to both parties; 3) number of

employee donors to the Democratic Party, divided by the number of donors to both

parties; and 4) number of unique Democratic donation recipients, divided by the number

of all recipients. As illustrated in Figure 3, organizational liberalism index (in which

lower value represent conservatism) was normally distributed.

! 34!

This measurement approach relies on donations from organizational members

who are likely to be socially prominent, ideologically motivated, and inspired to

disseminate their beliefs among others in the organizations (Rosenstone and Hansen,

1992; Verba, Schlozman, and Brady, 1995; Ansolabehere, Figueiredo, and Snyder,

2003). This approach is superior to an alternative survey-based as it allows for

unobtrusive measurement of ideology over time using a much larger set of data-points

than a survey based approach can realistically attain (Webb and Weick, 1983; Kotter and

Heskett, 1992).

2.3.3. Dependent Variables

The concession to activist demands. This variable is coded by expanding the

search to all the media articles in the Factiva database that mention the corporation

targeted by the protesters during the six months’ period following the protest event.

Trained graduate-level students looked through all the articles to ascertain the corporate

response to the protests. During this search, only if an article clearly mentioning

corporate agreement to activists’ demands was found, I code it as a concession.

Consistent with prior research (King, 2008), this coding approach is based on the premise

that if a given protest against a corporation has been covered in the national media, only

the announcements made in the public domain should be deemed as concessions. This

variable is also included in the models predicting pro-social claims to assess whether

concessions affected firm’s propensity to engage in impression management. Appendix C

provides examples of newspaper articles that were used to code concession events.1

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!1!It!is!reasonable!to!ask!if!ideological!valence!of!activism!matters!in!whether!it!is!met!with!concessions.!In!my!sample,!I!did!not!observe!much!variation!in!activists’!ideologies!–!only!about!4%!of!the!protest!events!could!be!

! 35!

Prosocial Claims. To measure prosocial claims, I follow McDonnell and King’s

(2013) study of impression management activities of corporations by coding the public

releases from Factiva’s two largest press release outlets—PR Newswire and Business

Wire—for all social-action related press releases issued by targeted companies. The count

of press releases during six months following the protest event is coded as the DV. The

number of pro-social claims issued by the firm six months prior to the protest event is

included as a control variable. The measure for firm’s pro-social claims after the protest

event was also included in the models predicting concessions to activism to assess the

overlap in firms’ concessionary and impression-management responses. Appendix D

provides examples of corporate press releases that were coded as prosocial claims.

CSR profile. Following prior research (Chin et al., 2012), this variable is coded

as the sum total of firm’s CSR strengths minus concerns in the six categories

(Environment, Employee Relations, Products, Diversity, Community, and Human rights)

during the year following the protest event (t+1). CSR for the year in which the protest

occurred was included as the control variable in all the models. The data are obtained

from the database originally created by Kinder, Lyndenberg, Domini research and

analytics, the best available source of longitudinal data on companies’ CSR profiles.

Although there were some changes in the methodology underlying KLD scores due to

purchase of KLD by Riskmetrics in 2009 (and eventually by MSCI in 2010), a sub-

samples analysis for the year 2001-2008 and 2010-2013 produced consistent results.

Given that CSR scores reflect the sum total of firm’s social and environmental

performance, it is reasonable to ask whether CSR should be thought a form of

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!categorized!as!“conservative”!(e.g.!proMgun!rights,!antiMLGBT).!None!of!the!protests!by!conservative!activists!resulted!in!corporate!concessions.!

! 36!

“concessionary response” instead of “impression management”. As I describe in the

results section, a series of robustness checks produce results consistent with my

theorizing of CSR as a strategic impression management response.

2.3.4. Independent and Moderator variable

Secondary stakeholders (vs. Primary stakeholders). This variable is

dichotomously coded to reflect whether the protest was organized by employees,

customers or shareholders (0), or by outside actors (1), such as social movement

organizations, students and advocacy organizations. Appendix E provides the description,

and frequency of these categories. In the models predicting change in CSR using firm-

year level observations, I created two splines variables for primary and secondary

stakeholder protest separately. The alternative approach of using a three-way interaction

between organizational liberalism, protest, and protest type was not feasible as the

interaction term drops out of the model.

2.3.5. Control Variables

Depending on the model, a number of control variables at the level of protest

event, targeted firm and industry are included to rule out alternative explanations for

concessions made by the corporations.

At the level of the firm, I control for CEO liberalism to capture the direct effect

of CEO’s personal values. Following Chin et al. (2013), I coded CEO liberalism using a

rolling measure of political donations made by CEOs during ten years prior to the current

year. Figure 4 illustrates the distribution of CEO liberalism Index during the firm-year

! 37!

observations included in the study. I control for firm size by including a measure of Net

sales, and firm profitability by including Return on Assets (net income / total assets). I

control for firm prestige using a dichotomous measure of whether the company was

included in the Fortune magazines’ 100 most admired companies list. To assess the effect

of firm’s slack resources, I included a measure of Debt-to-Equity ratio. Additionally, I

control for Unionized workforce (dichotomous) to capture the internal pressures to firm

decision-making, and ownership concentration (percentage of shares owned by

institutional investors) to capture the differences due to external pressures from the large

investors. All time-varying firm level controls are measured in the year prior to when the

protest response take place (year t-1). Replacing all the variables for their current year

(year t) values produced highly similar results.

At the level of the protest event, I include a count measure for the number of

social movement organizations (SMOs) that participated in the protest. To capture

difference in movement’s success due to overall mobilization, I include a control for

protest size using the number of people who protested (coded in three categories: <10,

between 10 and 100, between 100 and 1000). Additionally, I control for media coverage

to protest (number of paragraphs published in newspapers about the protest). I include a

dummy variable to indicate whether the movement demands were about an

institutionalized practice of the organization, such as toxic emissions in the production

process.

Lastly, in all the models, I control for HQ state liberalism (percent of the vote to

the Democratic party in the most recent presidential election) to capture the liberalism of

the locale. In the models using protest-events (N=300) as the unit of observation, I

! 38!

include measures for Information Technology industry (dichotomous) as IT industry is

widely known to have a more liberal orientation, and Democratic President

(dichotomous measure for years 2009-2013) to capture macro environmental factors that

may affect companies’ decision-making. In the models using firm-year observations, I

replaced Information Technology industry and Democratic president dummies with fixed

effects for six industry sectors (high-tech, natural resources, consumer products, utilities,

financial, and other services), and all calendar years.

2.3.6. Estimation Methods

I use a first stage model to correct for the non-randomness of companies that are

targeted. Since activists selectively choose their protest targets (Walker, Martin and

McCarthy, 2008), I use Heckman’s selection procedure to model the organizational

attributes, such as size, prestige, profitability and organizational ideology, as predictors of

activists targeting of certain companies. To correct for the selection bias, I include prior

protest against the firm, and prior protest against the industry as the instrument

variables in the first stage model as prior protest is a significant predictor of the

occurrence of protest, but not the concession. The first stage produces a selection effect

coefficient (also known as Inverse Mills ratio), which is then added to all the second

stage models as a control variable. The first stage model utilized all the firm-year

observations for which data on predictor variables were available (N=7436). In the first

stage model, I also specify six industry sectors (high-tech, natural resources, consumer

products, utilities, financial, and other services.) and calendar year fixed effects to

! 39!

control for macro-environmental influences on activist opportunity structure. I also

specify clustering of standards errors at the firm level to account for autocorrelation.

To predict corporate concessions to protest, I use the probit model, using the

protest events as the unit of analysis (N=300). Errors are clustered at the firm level.

To predict corporate deployment of pro-social claims, I use the Possion regression

as the dependent variable had a significant right skew. I model the count of prosocial

claims using the protest event as the unit of analysis (N=300). The test for over-

dispersion suggests that the negative binomial regression was not appropriate for these

models. Errors are clustered at the firm level.

To predict corporations’ strategic use to CSR, I use the Ordinary least Square

regression as the dependent variable has Gaussian distribution. I model firm’s CSR

profiles using firm-years as the units of analysis (N=6849). I cluster errors at the firm

level and specify fixed effects for calendar years and six industry sectors, as in the first

stage model.

Although I report the regression results for each of the dependent variables

separately, I found qualitatively similar results when I analyzed firm’s concessionary and

impression-management responses using Seemingly Unrelated Regression (SUR)

(Zellner, 1962). Because SUR requires each dependent variable to have the same

distribution, I took the natural log of the “pro-social claims” variable before running

SUR.

! 40!

2.4. RESULTS

Table 1 and Table 2 present descriptive statistics for variables at the protest event

level and firm-year level respectively. These bivariate analyses in Table 1 indicate that

organizational liberalism is positively correlated with corporate concessions to activism,

and negatively correlated with impression management using prosocial claims. Prosocial

claims (during six months after the protest) and Concessions are themselves negatively

correlated, suggesting that those two types of strategic responses may be used as

substitutes for each other when corporations experience activist protest. Interestingly,

CSR and pro-social claims are also negatively correlated, suggesting that companies may

perhaps rely on one or the other impression management strategies, not both. I now turn

to models that assess the net effects of different factors on firm’s likelihood of

experiencing protest, and their subsequent responses.

Who concedes?

Models predicting corporate concessions to social activist protest are included in

Table 4. Consistent with hypothesis 1, I find that organizational liberalism is a significant

predictor of firm’s likelihood of conceding to activist demands (p<.05 in Model 2). This

finding suggests that liberal companies, relative to their conservative peers, are more

likely to rely on the concession as a strategic response to social activism. Other findings

from this analysis indicate firms’ were more likely to concede during the Democratic

presidential administration (p<.05 in Model 1), suggesting that institutional pressures

play an important role in the success of activism. Companies with a more dispersed

ownership exhibited a higher likelihood of conceding to activist demands (p<.05 in

Model 3). Even though the relatively small sample size does not provide enough

! 41!

statistical power, I found qualitatively similar results after adding dummy variables for

six industrial sectors, and calendar years. In robustness checks, I found the results to be

highly consistent even if I exclude donation records from senior executives (vice

presidents and above) from the measure of organizational ideology. This analysis

suggests that the effects of organizational ideology are not driven by executives’

ideology, but rather reflect the prevailing beliefs in the organization. I also considered

whether CEO ideology and organizational ideology interact to produce amplified effects,

but no such patterns emerged.

Impression Management - Pro-social claims

Results of the analyses predicting corporate deployment of pro-social claims as a

strategic response to activist protest are presented in Table 5. As Model 2 shows, I do not

find a significant main effect of organizational liberalism on the firm’s deployment of

prosocial claims; hence hypothesis 2 was not supported. However, when I entered a

squared term of organizational liberalism in the model, it was significant (p<.05 in Model

4). This surprising finding suggests that the relationship between organizational

liberalism and prosocial claims is curvilinear. When plotted in Figure 6, this finding is

consistent with my expectation that the higher the firms’ liberalism, the less they will

utilize pro-social claims. However, contrary to hypothesis 2, Figure 6 also indicates that

high conservatism also decreases the frequency of prosocial claims as a response to

activist pressure. I provide a potential explanation for this finding in the discussion

section. Other notable findings in these analyses suggest that corporate concessions have

a negative effect on prosocial claims, indicating that prosocial claims may serve as

substitute, not complementary, responses to corporate concessions, i.e. firms that concede

! 42!

are less likely to engage in prosocial claims and vice versa. Also, unionized firms

exhibited a higher propensity to engage in prosocial claims than non-unionized firms.

In robustness checks, I did not observe the presence of problematic outliers, as is

often the case with curvilinear effects. There were no outlier observations in

organizational liberalism variable. Winsorizing the dependent variable at +- 4 S.D. left

the findings unchanged, as did specification of robust standard errors. Adding fixed

effects for industrial sectors and calendar years also produced qualitatively similar

results, albeit with lower statistical power. An interaction term for CEO and

organizational liberalism was again not significant.

Impression Management – Corporate Social Responsibility

To test Hypothesis 3, I predicted change in firm’s CSR scores, results of which

are shown in Table 5. Since these analyses were performed at the firm-year level, the

effect of organizational liberalism on corporate deployment CSR was tested as an

interaction effect. While organizational liberalism and activist protest independently

predicted firm’s advances in CSR, the interaction term was not significant. Hence,

hypothesis 3 was not supported. Return on assets, firm prestige, and HQ state liberalism

were positively associated with CSR.

Secondary vs. Primary Stakeholder

Hypothesis 4a, 4b, and 4c predicted that the effect of organizational liberalism on

corporate responses to activism would be moderated by whether the activists were

secondary stakeholders. I hypothesize that the differences among conservative and liberal

companies would be especially pronounced in their responses to secondary stakeholders,

as conservative companies will be especially reluctant to engage in concessionary (H4a)

! 43!

and impression-management based (H4b and H4c) responses to secondary stakeholder

protest.

Model 3 of Table 4 predicts corporate concession to activism using interaction

effect of organizational liberalism and secondary stakeholder protest. The interaction

term was significant at p<.05, suggesting significant support for Hypothesis 4a. Figure 7

illustrates this finding in a graph, suggesting that the effect of secondary stakeholders on

firm’s likelihood of concession was indeed weaker for conservative companies than for

liberal companies. Surprisingly, liberal companies were even more likely to concede to

the demands of secondary stakeholders than primary stakeholders, a finding that I turn to

in the discussion section. The effect of primary stakeholder protest on concession did not

significantly differ based on organizational ideology.

In Model 3 of Table 5, I tested the interaction effect of organizational ideology

and secondary stakeholder protest on firm’s deployment of prosocial claims. The

interaction term was not significant; hence Hypothesis 4b was not supported. Also, the

interaction term for the main curvilinear effect of organizational liberalism and secondary

stakeholder protest was not significant. This suggests that the protest by primary and

secondary stakeholder did not elicit different prosocial claim-making efforts among

liberal and conservative companies.

The results for the test of Hypotheses 4c are presented in Model 5 of Table 6.

Recall that I analyze CSR as a corporate response to activism using firm-years as the unit

of analysis. Because this approach requires using interaction terms to test the effect of

organizational liberalism on responses to protest, I created two separate variables for

Primary Stakeholder Protest and Secondary Stakeholder Protest and multiplied them with

! 44!

organizational liberalism variable. An alternate approach of using a three-way interaction

between organizational liberalism, protest and protest type (primary vs. secondary) was

not feasible as it caused the three-way interaction term to drop out of the model. The

current approach allows me to distinctly examine whether the effect of primary and

secondary stakeholder protest on CSR depends on organizational ideology. The

interaction term of primary stakeholder protest and organizational liberalism had a

negative and statistically significant effect on CSR, whereas the interaction term for

secondary stakeholder protest and organizational liberalism was not significant.

Moreover, in a coefficient contrast test, I found that the interaction term of primary

stakeholder protest and organizational liberalism was significantly greater than the

interaction term for secondary stakeholder protest and organizational liberalism (p<.01),

suggesting strong support for H4c. As illustrated in Figure 8, this finding suggests that

organizational ideology mattered more for firm’s CSR based response to primary

stakeholder protest than to the secondary stakeholder protest. While liberal firms

exhibited no significant difference in their CSR response to primary vs. secondary

stakeholder protest, conservative firms’ responded much less vigorously when the

protesters were secondary stakeholders.

As mentioned earlier in the hypothesis development section, I explored the

possibility that firms may use CSR as a type of concessionary responses, rather than a

type of impression management response as envisaged by my theory. I examined this

possibility in several ways:

First, I empirically tested whether companies exhibited a change in CSR in a

category that is related to activist demands. I manually categorized all protest events in

! 45!

the six categories that are part of KLD measure, effectively creating a measure of

“Related” CSR, which can potentially be more concessionary in nature. In the analysis at

the protest-event level (N=300), organizational ideology was not a significant predictor of

changes in this Related CSR score (by itself or as an interaction with stakeholder type).

Second, I reanalyzed the data at the firm-year level (N=6849) by separating the

CSR measure into two categories: Related vs. Unrelated CSR. To code unrelated CSR, I

excluded the related CSR category from the 300 observations and excluded one randomly

selected CSR category from the remaining 6549 observations. These excluded

observations represented a type of related CSR measure. Predicting unrelated CSR

produced results that are highly comparable to results reported in Table 5. Predicting

related CSR did not yield any significant findings, suggesting that conservative firms’

advances in CSR are not a form of concession to activist demands.

Third, I reran the CSR models after adding “concession” variable in the models to

assess whether changes in CSR by conservative firms were driven by actual concession

to activist demands. The concession was not a significant predictor of change in CSR,

and it left the findings changed.

To explore this issue qualitatively, I manually examined the data to explore the

different types of demands made by primary stakeholder activists, and the CSR areas that

conservative companies changed in response to primary stakeholder demands. It appears

that the modal category for primary stakeholder demands was Employee Relations

(typically involving demands for improving the wages), and the conservative companies

almost always responded by increasing their emphasis on a variety of unrelated CSR

categories, such as diversity, product quality, and community relations.

! 46!

In sum, the analyses confirm my view of the change in CSR following activist

protest as a form of tactical response by corporations to advance a positive image to

external audiences.

Who gets targeted?

Table 3 includes models predicting the targeting of corporations by activists. As

Hypothesis 5 predicts, the organizational liberalism had a significant curvilinear

relationship with firms’ likelihood of getting targeted (p<.001 in Model 3). Figure 1

provides illustrative evidence for the hypothesis that the corporations on either end of the

ideological spectrum (highly liberal and highly conservative) are more often targeted by

activists than corporations that ideologically more moderate. This finding builds on prior

research by Briscoe, Chin and Hambrick (2015), who reported a positive effect of

executive liberalism on firms’ likelihood of getting targeted by activists. Additional

findings in these models suggest that the companies that are larger in size (revenues),

have more dispersed ownership, and are located in liberal states are more likely to

experience social activist pressure. DFBETA tests suggested that there were no

problematic outliers. Specification of robust standard errors also yielded highly

comparable results. In additional analyses, I considered if ideology predicted targeting

whether companies were targeted by primary vs. secondary stakeholders, but no such

patterns were found. Also, including two Inverse Mills ratios from two separate first

stage models (predicting primary and secondary stakeholder protest) in the main

regression models did not change any of the results reported here.

! 47!

It is also important to emphasize that the findings reported above were also

substantively significant in terms of effect size. In the analysis for Hypothesis 1, I find

that the relatively liberal firms (with liberalism score of 70) had 30% probability of

conceding to activist demands whereas relatively conservative firms (with liberalism

score of 30) only had 15% probability of conceding to activists. This doubling of

probability provides strong support for my ideas. In the analysis for Hypothesis 2, I find

that relatively conservative (30) and liberal (70) firms issued an average of 2.67 and 3.03

pro-social press releases respectively, both of which were significantly lower than the

4.39 press releases issued by politically moderate firms (liberalism score of 50). In the

analysis testing Hypothesis 4a, I find that liberal firms (70) had 34% probability of

conceding to secondary stakeholders, whereas conservative firms had only 11%

probability. Testing Hypothesis 4c, I find that liberal (70) and conservative (30) had a

difference of 1.11 in their CSR score in response to primary stakeholder protest, which

prior research has deemed to be a highly significant difference (Chin et al., 2013).

2.5. DISCUSSION

Unpacking the strategic dynamics between corporations and social activists

suggests that researchers need to pay attention to the attributes of both firms and activists.

While prior research has shed light on how the features of the activism affect changes in

organizations, I argued for looking at interior features of organizations to understand the

question of where activism emerges, and how companies respond to activism. In doing

so, I introduced organizational ideology, conceptualized on the classic liberalism-

conservatism axis, as an internal attribute of firms that engenders different strategic

! 48!

responses by corporations, and, at the same time, influences activists’ calculus of which

firms to target.

Focusing on organizational ideology provides a new vantage for the social

movement research that has so far explained movement’s success using theories of power

and threat. Scholarship in the domain of political mediation and political process theories

suggests that attributes of target organizations may help activists gain momentum and

ultimately threaten the target into capitulation to activist demands (Amenta et al., 1992;

Piven and Cloward, 1978). The present research suggests that organizational liberalism,

in the form of prevailing political values of organizational members, may perhaps

obviate, or at least reduce, the need for the external threat to gain success against

organizations. This highlights an opportunity for research in social movement and

organizations to consider when the threat-based models of movement influence may

serve as substitutes or complements to corporations’ internal, ideological proclivities to

incorporate activist input into the firm decision-making.

This research also responds to the growing interest among social movement

scholars to move beyond corporate concessions to consider a repertoire of strategic

responses available to decision-makers to attenuate the threat to firm routines and

performance (Soule, 2012). Increasingly, researchers have examined different strategic

approaches that are available to corporate decision-makers. These include prosocial

claims (McDonnell and King, 2012), sponsoring of AstroTurf movements (Walker,

2014), and corporate philanthropy (Zhang and Luo, 2013). Even though the multifaceted

nature of corporate responses to activism has been widely noted, no existing study has

attempted to systematically consider the factors that may give rise to different tactical

! 49!

approaches in response to the same activist protest event. In this research, I have

spotlighted organizational ideology as a highly generalizable attribute of corporations that

predicts companies’ substantive and impression-management responses to activism.

While the effect of organizational liberalism on firm’ propensity to concede to

activist demands was consistent with expectations, the observed curvilinear effect of

liberalism on impression-management using prosocial claims begs further explanation.

As hypothesized, liberal companies exhibited a lower propensity to respond with

prosocial claim-making. This observation is consistent with liberal ideology’s preference

for shared responsibility, and with the finding that liberal companies already concede to

activists in greater numbers than conservative companies. However, contrary to

expectations, I found that an increase in conservatism also had a similar effect of

reducing firm’s reliance on prosocial claims as a strategic response. Even though my

empirical analysis does not allow me to observe this process, I speculate that the

decision-makers in highly conservative firms may see merit in not increasing firms’

prosocial communication as such efforts may be perceived as inauthentic and contrary to

social expectations, raising the potential for backlash from stakeholders.

For the first time, this study suggests that the corporate social responsibility

profiles of the firms may act as yet another form of impression management response to

the activist protest. Prior studies have often theorized that companies may use CSR as a

strategic behavior to advance a positive image to outside constituents (Roberts, 1992;

Baron, 2001; McWilliams and Siegel, 2010). But this perspective has not been

adequately reconciled with a more benign perspective suggesting that the CSR is geared

toward creating the larger societal good (Chin, Hambrick and Trevino, 2013). While this

! 50!

discussion involves considerable epistemic challenges, being able to separate firms’

voluntary CSR activities from CSR activities that are induced by external pressures may

allow us to distinguish the “strategic” and “social” forms of CSR. This study suggests

that while liberal companies do more CSR overall, conservative companies had a

significantly greater increase in CSR after experiencing social activism. These findings

shed light on the ideological underpinnings of voluntary and activism-induced Corporate

Social Responsibility.

This research also combines ideas from stakeholder theory and social movement

research to consider how liberal and conservative firms’ responses to activist protest may

vary based on whether activists are primary or secondary stakeholders (Clarkson, 1995;

Vasi and King, 2012). Since firms tend to have considerable economic interdependencies

on primary stakeholders, and little or no interdependencies on secondary stakeholders, I

hypothesized that a firm’s conservatism will reduce its likelihood to responding to

secondary stakeholders, both through concessionary and impression-management

strategies. While the findings support the main expectation - that conservative firms’ will

respond less vigorously to secondary stakeholders than to primary stakeholders,

interesting patterns were found for liberal firms’ response pattern, who were, in fact,

more likely to concede to secondary stakeholders than to primary stakeholders. A

potential explanation for this finding could be that the liberal firms may show greater

tendency to preemptively respond to primary stakeholders before they engage in public

protest – a possibility that future research may explore.

Additionally, this research identifies organizational ideology as a condition that

led activism in some directions more than others. Firms’ likelihood of becoming targets

! 51!

depended on the dominant ideology of the firm, such that the highly liberal and the highly

conservative companies were more often the targets of activist protest than the

ideologically moderate companies. This finding indicates potential for advancing

research in opportunity structure theory for activism directed against corporations. While

existing research opportunity structure suggests that activist targeting is driven by activist

calculus to maximize chances of winning (Briscoe et al., 2014), this research finds

support for the idea that activists may simultaneously seek to target highly conservative

companies that offer little promise of success. Building on social movement research that

portrays activist calculus to be a complex process involving multiplicity of goals (Meyer,

1993; Staggenborg, 1991; Bartley and Child, 2014), I theorize and show that activism

arises in both favorable and adverse conditions, as indicated by organizational ideology.

Also, my findings suggest that ideological moderation serves as a shield against activism,

as activists may neither perceive promise of success nor potential to mobilize attention.

Taken together, the results of this study offer an initial picture of firms’

ideologically motivated responses to activist protest. It seems that liberal firms are more

open to activist demands and concede readily upon experiencing activist protest. In

contrast, firms that are ideologically conservative or moderate tend to rely more heavily

on impression-management strategies to neutralize the threat of activism. Moreover,

conservative firms’ responses to activism appear to be more pronounced when activists

are primary (vs. secondary) stakeholders with a greater potential to threaten corporate

resources.

! 52!

2.5.1. Implications and Future Research

Building on prior research (Gupta, Briscoe and Hambrick, 2014), in this study I

invoked motivated cognition and logic of appropriateness as the twin mechanisms that

may infuse the influence of organizational ideology on corporate decisions to respond to

activism. Future research may assess the relative influence of these mechanisms, and

identify additional pathways through which organizational ideology can manifest in

decisions. For example, ideology may affect decision-makers by creating a heightened

fear of mobilization among employees. While some quantitative approaches can

potentially be useful to isolate different mechanism, in-depth interviews with decision-

makers may be particularly insightful in shedding light on the underlying mechanisms.

This research may open avenues for research in other areas of non-market strategy

(Eesley and Lenox, 2007; Baron and Diermeier, 2007). While non-market strategy

scholars have had a longstanding interest in understanding how social, political and legal

factors in firms’ environment affect firm’s decision-making and performance, they have

theorized the firm-activist interaction as a process of rational calculus. In this study, I

have argued for incorporating the sociopolitical factors within the firm to elucidate

ideological bases of firm’s non-market strategy. While this research serves as an initial

step toward understanding how organizational ideology may seep into repertoire of

companies’ strategic responses to social activism, future research may consider how

organizational ideology affects other strategic non-market behaviors, such as lobbying,

sponsoring grassroots activism, managing media coverage, etc.

Lastly, researchers may consider how the ideas presented in this study can be

generalized to other national contexts. Since social activism is a ubiquitous feature of

! 53!

modern society, it would be interesting to translate the organizational ideology concept

and measure to other national contexts, particularly emerging economies, such as India

and China. Further, scholars may address whether organizational ideologies are more or

less important in emerging economies with greater political influences on firm behaviors

(Marquis and Maynard, 2015), and whether there are other strategic responses utilized by

the firms in those contexts to mitigate the threat of activism.

! 54!

Chapter 3

ORGANIZATIONAL POLITICAL IDEOLOGY AND BUSINESS UNIT DIVESTITURES

In the last few decades, managing the scope of the firm’s businesses has emerged

as a key task for corporate strategists. A relentless focus on shareholder value creation

has led decision-makers in multi-business corporations to actively manage the portfolio

of a firm’s business by “right-scoping” business activities, particularly when firm’s “poor

performance becomes noticeable” to key constituents (Duhaime and Schwenk, 1985:

291). This shift toward portfolio restructuring has been partly led by evidence regarding

poor stock market evaluation of highly diversified conglomerate firms, and also by

cultural theorization of the notion that corporations are nothing but bundles of highly

dispensable physical and human assets (see, Davis and Stout, 1992; Davis, Diekman and

Tinsley, 1994). Over the past three decades, executives of the large U.S. firms have

resorted to dismantling the corporate portfolio of businesses on a large scale, causing

unprecedented growth in divestiture activity (Bruner, 2004; Gaughan, 1999). Major US

corporations, such as ConAgra Foods, Hess Corporation and Compuware, in several

industries have touted their divestiture decisions as strategic efforts to instill efficiencies

(ConAgra Foods, 2003; Seeking Alpha, 2013; Compuware, 2014).

When do firms see business unit divestiture as a suitable response to

underperformance? Even though the overall number of divestitures by large US firms has

increased since 1980s, firms continue to exhibit considerable variation in willingness to

divest their businesses (Duhaime and Grant, 1984; Duhaime and Baird, 1985; Shimizu

and Hitt, 2005; Buccholtz et al., 1999; Feldman, Amit and Villalonga, 2014). While

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studies in corporate strategy and finance have consistently documented

underperformance as contextual trigger of firms’ decisions to divest, the findings about

the actual economic benefits of divestitures have been decidedly mixed (Duhaime and

Grant, 1984; Brauer, 2006). While some studies have found a positive effect of

divestitures on firm’s performance (Bergh, 1998; Hoskisson and Johnson, 1992;

Markides, 1995; Lang, Poulsen, and Stulz, 1995), many others have found an

insignificant or negative effect (Bergh, 1995; Montgomery and Thomas, 1988; Wright

and Ferris, 1997; Masulis and Korwar, 1986; Schill and Zhou, 2001, Feldman, 2014).

This raises a perplexing question –given the ambiguity about the benefits of divestitures,

why do some decision-makers continue to view them as a strategic recipe to cure poor

performance? Recently, scholars have begun to underscore the importance of social and

human factors that enhance a firm’s propensity to divest, such as a newly hired CEO

(Feldman, 2014), or factors that enable firms to resist engaging in divestitures, such as

family control of the firm (Feldman et al., 2014).

Despite these advancements, scholars have not paid adequate attention to the

possibility that firms’ willingness to divest business units in response to

underperformance may additionally stem from the prevailing norms, values and beliefs

inside the firm. Davis and Stout (1992: 608) described that normative beliefs about

whether corporations are a “complex social organization” or a mere “bundle of assets”

vary across firms and over time, shaping the extent to which decision-makers treat

corporations as a collective social entity, vs. a set of individual elements in an internal

marketplace that can be readily dispensed or rearranged (Davis, Diekman and Tinsley,

1994). What gives rise to such differences in conceptions of the firm? Research in

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strategic management has duly acknowledged the idea that strategic choices of firms are

often affected by beliefs, preferences, and ideologies of members of the firm (Hambrick

and Mason, 1984; Duhaime and Schwenk, 1985), yet so far no systematic study has

examined the idea that organizations may embody different conceptions of the

corporation due to prevailing values and beliefs among organizational members, causing

variation in firms’ boundary reconfiguration behavior such as divestitures.

Classic research in organizations has posited ideology as a driving force behind

firm’s major structural choices (Selznick, 1949). Recent research has also shown that the

political ideologies of corporations, defined as “prevailing beliefs among organizational

members about how the social world operates, including convictions about which

outcomes are desirable and how they should be achieved”, affect their strategic decision-

making (Gupta, Briscoe and Hambrick, 2015). Building on these ideas, I propose that the

dominant political ideology of the firm, conceptualized on the liberalism-conservatism

axis, will exert significant influence on the extent to which decision-makers view the firm

as a “cooperative social entity” with multiple, often-competing goals, or a “bundle of

assets” in service of the unitary goal of shareholder value creation. These conceptions

will in turn manifest in firm’s willingness to divest units following the periods of

underperformance.

I argue that political ideologies of liberalism and conservatism are well positioned

to assess the systematic differences in firms’ divestiture behavior as they offer

contradictory views on how a firm should be best organized to achieve its economic

goals. A conservative ideology suggests that decision-makers must use financial

efficiency as a primary criterion for making decisions, and they must hold individuals and

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social entities within the firm accountable for their own fate (Tetlock, 2000). In contrast,

a liberal ideology calls for pursuing multiple objectives including creating value for

myriad stakeholders of the firm, and considering collective responsibility for failures and

successes of entities within the firm (Jost, 2006).

At the organizational level, ideologies of liberalism and conservatism may create

divergent conceptions of the firm in the minds of decision-makers, and engender strategic

decisions that align with those conceptions. I envision that organizational political

ideologies (hereafter, organizational ideologies) will bear on strategic decision-making

through twin mechanisms of motivated cognition, as actors across the organizational

hierarchy will nudge decision-makers towards choices and decisions that conform to the

prevailing ideology of the firm (Higgins and Molden, 2003), and logic of

appropriateness, as decision-makers will feel normative pressures to act in accordance

with the prevailing ideological beliefs (March and Olsen, 2006). Taken together, these

mechanisms will inject the influence of organizational ideology into corporate strategic

decision-making, including into divestiture decision-making. In particular, in this study, I

examine the influence of ideology on three crucial arenas surrounding firms’ divestiture

behavior.

First, I propose that organizational ideology will shape the extent to which

decision-makers view divestiture to be a suitable strategy to cure firm underperformance.

I anticipate that decision-makers in conservative companies will see merit in holding

business units within the firm accountable for their performance, and dispense with them

in order to cure poor firm performance. In contrast, decision-makers in liberal firms will

see merits in assigning collective responsibility for the firm’s successes and failures, and

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will exhibit greater reluctance to divest business units to recover from underperformance.

I also anticipate that the attenuating effect of organizational liberalism on the likelihood

of a business unit’s divestiture during period of underperformance will be particularly

pronounced when the countervailing power of stockholders is low due to dispersed

ownership, and when the firm’s business units are not related due to product-market

overlap.

Second, I argue that organizational liberalism will not only affect whether and

when business units are divested, but whom they are divested to. Specifically, prior

research has argued that firms often have considerable latitude in inviting and choosing

among different types of buyers for its business units (Andrade and Kaplan, 1998; Kaplan

and Stromberg, 2008), yet little is known about the determinants of those decisions. As

an initial step, this study examines whether a firm chooses to divest its unit to a company

outside of the focal firm’s industry, or a private equity firm, as these two types of buyers

are likely to imply different fates for the divested unit. Specifically, I anticipate that

liberal firms, due to their greater concern for the future of the divested unit and its

members, will be more likely to divest to an industry-outsider corporation, whereas a

conservative firm will be more likely to divest to a private equity firm, which is likely to

promise higher financial returns but also more likely to dismantle the units and slash jobs.

Lastly, I expect that liberal firms’ reluctance to divest business units during

underperformance will have consequences for firms’ post-divestiture performance. I

argue, because decision-making in liberal firms will account for social, human and

knowledge related costs (in addition to the financial costs) when considering divestment,

the promise of value creation from a certain divestiture must be higher for a liberal firm

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than for a conservative firm in order for it to be even considered by decision-makers in

the first place. This suggests that, ceteris paribus, the divestitures pursued by liberal firms

may create greater value than do the divestitures pursued by conservative firms.

I test these predictions using a novel measure of organizational ideology

comprising of political donations made by employees of Fortune 500 companies. Using

multiple criteria to identify sizeable business unit divestitures, I examine the occurrence

of 300 divestiture events over the period of 2001-2013. The findings largely confirm my

expectations, and expand our understanding of ideologically motivated strategic behavior

in for-profit firms. Demonstrating the role of ideology in shaping firm’s divestiture

decision provides a new vantage for existing research that has, for the most part, provided

economic explanation for business unit divestitures (Duhaime and Grant, 1984; Bergh,

1995; 1997). This is an important perspective to advance as large US firms’ divestiture

activities have not only caused significant changes in the landscape of corporate America

(Davis et al., 1994), but have also impacted the larger society by altering the nature of

employment (Bidwell, Briscoe, Fernandez-Mateo, Sterling, 2013).

3.1. Firm as an Internal Market vs. a Cooperative Social Entity

Starting from Coase’s (1937) influential essay, the question of how firms create

value beyond the external markets has been a subject of fertile debate. A range of

perspectives have been offered by scholars trying to locate the source of firm’s

superiority over the external market in firm attributes, such as shared culture (Sorenson,

2002), knowledge (Grant, 1996), and resources (Barney, 1991), two overarching

perspectives have emerged that propose contrasting conceptions of the firm, which I will

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refer to as the “internal market” and “cooperative social entity” views.

First, scholars in transaction cost economics have largely adopted the view of the

firm as an internal market. Williamson (1975) elaborated on the Coase’s original ideas,

and regarded the minimization of transaction cost as the main advantage of business

organizations. Proponents of transaction cost theory posit that firm’s internal market is

superior to the external market because it affords decision-makers access to better

information about the prospects of different businesses, allowing for more efficient

allocation of resources to economic avenues than can be attained by external markets

(Williamson, 1996; Stein, 2003; Maksimovic and Phillips, 2013). Indeed, the conception

of firm as an internal market posits efficient allocation of resources as the primary task of

multi-business corporations, and argues for financial efficiency as the basis for

reconfiguring firm’s boundaries (Berger and Ofek, 1995; Stein, 2003). A core premise of

the internal market perspective is that firms can attribute (under)performance to different

subunits with high accuracy, enabling decision-makers to prune businesses to achieve

efficiency.

While the perspective of firms as internal markets continues to be the dominant

imagery among scholars of financial economics, scholars in organizational theory and

strategy have conceived the firm to be a much more complex social entity in which value

creation happens through cooperative behavior among various organizational units (Pitts,

1980; Kogut and Zander, 1992). In this view, firms are comprised of actors with diverse

motives and skills, whose collaborative efforts can create superior value than can be

created by them individually (Mayo, 1945; Barnard, 1968; Teece and Pisano, 1994).

Economic productivity of the corporation is deemed to depend on knowledge creation

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and dissemination among different entities within the firm (Pitts, 1977; Ouchi, 1980;

Burgelman, 1983; Gupta and Govindarajan, 1991; Grant, 1996; Tsai, 2001).

Adopting the view of the firm as cooperative social entity vs. internal market has

crucial implications for how individual and collective entities within the firms are

evaluated and rewarded (Kerr, 1985; Kerr and Slocum, 1987, 2005). While the internal

market-based view prescribes the creation of practices and policies that strive for

independent and objective assessment of each organizational unit and assignment of

individual accountability, a view of the firm as a cooperative social entity encourages

firms to supplement individual incentives with policies and practices that enhance the

sense of mutuality, trust, cooperation, and shared fate among actors (Ouchi, 1980; Ouchi

and Jaeger, 1978; Hill, Hitt and Hoskisson, 1992; Pitts, 1980; Kerr and Slocum, 1987).

For example, Ouchi (1980, 1992) argued that goal multiplicity and ambiguity about

individual performance necessitate organizations to depart from market mechanisms

toward reliance on norms, socialization, and sense of interdependence.

These two views suggest divergent perspectives on corporations’ boundary-

reconfiguration activities. In the internal market perspective, decision-makers are advised

to engage in frequent evaluation of organizational units and reconsideration of firm

boundaries to maximize firm performance. In a firm conceived as internal market, highly

performing units should be nurtured and retained, whereas poorly performing units

should be divested to divert the resources to more profitable avenues (Berger and Ofek,

1995; Stein, 2003).

In contrast, if the firm is a cooperative social entity, this calls for creating

complementary capabilities across business units to create long-term economic value

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(Tsai, 2002; Feldman, 2014). Since business units are viewed as both users and providers

of collective knowledge that resides in the firm (Gupta and Govindarajan, 1991),

contribution of each business unit to the firm’s overall performance is considered

imperfectly distinguishable at best. As a result, decision-makers are expected to

recognize that corporate performance is a product of the tacit interdependencies among

business units and path-dependent organizational routines, which, if ignored during

divestiture decision-making, can have huge impact on the fortunes of the firm (Feldman,

2014).

While consequences of adopting different conceptions of corporation have been

subjected to much debate (Stein, 2003; Feldman, 2014; Feldman, Amit, and Villalonga,

2014), there is little in the way of systematic examination as to what leads decision-

makers to adopt such contrasting views of the firm. In this study, I argue that

organizational ideology will influence the dominant conception of the corporation in a

given firm, shaping the proclivity of decision-makers in the firm to divest business units

during periods of poor firm performance.

3.2. THEORY AND HYPOTHESIS DEVELOPMENT

Organizations are known to vary widely in their political ideologies, and these

variations are likely to influence a range of decisions within the firm (Simons and

Ingram, 1997). While ideologies may exert their influence directly on some salient social

issues, such as CSR (Chin et al., 2012), gay and lesbian advocacy (Briscoe et al., 2014),

ideology may also influence core strategic activities of a firm by shaping the dominant

conception of the firm. Indeed, a growing body of research in strategy and finance

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focusing on executives’ political ideologies has found them to be predictive of a range of

strategic firm behaviors (Hutton, Jiang and Kumar, 2013; Lee, Lee and Nagarajan, 2014;

Christensen et al., 2014). Recently, Gupta, Briscoe and Hambrick (2015) found that

organizational ideologies tend to have stronger effects on a range of CSR practices than

ideologies of the executives.

Research in political psychology has highlighted the core differences between

liberal and conservative ideologies (Tetlock, 2000; Jost, 2006; Jost et al., 2003; Skitka

and Tetlock, 1993). Scholars have shown that one of the key difference between liberal

and conservative ideologies pertain to their preference for individual vs. collective

responsibility. While liberal ideology favors the belief that assuming collective/shared

responsibility for actions leads to superior societal outcomes, conservative ideology

stands for the principle that efficiency results from holding entities (individuals, groups

and other collective units) accountable for their actions and outcomes (Skitka and

Tetlock, 1993; Jost, 2006). Through process of attraction-selection-attrition processes

(Schneider, 1987; Chatman, 1991), many companies may come to acquire distinctly

liberal or conservative ideology, resulting in conservative firms’ acceptance of policies

that support the principles of individual responsibility, leading to adoptions of practices

and routines that rely on individual rewards and punishments as a means to achieve

superior performance. In contrast, liberal companies may adopt policies and structures

rooted in the principle of collective responsibility by adoption of routines that emphasize

collective rewards and penalties.

I propose that, due to these underlying differences in prevailing beliefs about

individual vs. collective responsibility, organizational ideology will influence whether

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decision-makers conceive of the firm as an internal market with many disparate and

disposable elements, or as a cooperative social entity comprising of synergistic and

interdependent elements. Specifically, I propose that, decision-makers in conservative

firms, due to prevailing beliefs for individual responsibility (Tetlock, 2000), will

conceive of firms’ businesses as distinct entities interfacing with each other in an internal

market. In contrast, decision-makers in liberal firms, owing to prevailing beliefs for

collective responsibility, will espouse beliefs that the firms’ businesses are tightly

coupled entities whose complementary actions create value for the firm (Tetlock, 2000).

In turn, these ideologically motivated conceptions of the firm will manifest in differences

in firms’ propensity to divest their business units.

3.2.1. Organizational Ideology and Business Unit Divestitures in Response to Poor

Firm Underperformance

Psychological research has shown that decision-makers tend to be highly averse

to losses (Tversky and Kahneman, 1973), and are often forced to reconsider their

strategic choices after experiencing underperformance (Duhaime and Schwenk, 1985).

As a result, researchers have found firm underperformance to be one of the strongest

predictors of business unit divestitures (Dranikoff et al., 2002; Duhaime and Grant, 1984;

Harrigan, 1981, 1982; Markides, 1992b; Montgomery and Thomas, 1988; Pashley and

Philippatos, 1990).

While corporate strategists may sometimes operate on “autopilot” mode during

periods of munificence, performance declines act as uncertainty-inducing jolts that

instigate decision-makers to search for explanations and sources of problems in the

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organization (Cyert and March, 1963). As decision-makers attempt to diagnose the

sources of underperformance within the firm, there are always some business units that

are regarded to have greater prospects than others (Rajan, Servaes and Zingales, 2000;

Arrfelt, Wiseman and Hult, 2013; Duhaime and Baird, 1985).

In those instances, the prevailing conception of the firm as an internal market or a

cooperative social entity may engender differences in strategic decisions of companies.

As decision-makers contemplate about approaches to improve firm performance,

differences in the profitability of business units will provide conditions for prevailing

organizational ideology to influence firm’s decisions regarding the future of different

businesses. Specifically, while decision-makers may be generally attuned to pruning

business units during underperformance, organizational ideology, owing to differences in

prevailing beliefs about individual vs. collective responsibility, may affect the extent to

which decision-makers’ view engaging in business unit divestitures as a suitable

approach to cure underperformance.

Organizational ideology will primarily exert its influence through top

management team members, who prepare forecasts for different businesses, and the CEO,

who makes final decisions about the fate of different businesses (Moschieri, 2011).

Through the mechanism of motivated cognition, organizational decision-making will be

infused with firm’s ideology as the actors across layers of organizational hierarchy make

sense of the technical efficacy of difference choices, and reflecting their values and

beliefs in the proposals and requests that they present to senior management (Kunda,

1990; Higgins and Molden, 2003). Additionally, through a more direct mechanism of

logic of appropriateness, decision-makers will feel compelled to formulate their decisions

! 66!

in light of the prevailing beliefs, norms, and rules of the collectivity, nudging them

toward decisions that will be widely accepted (March and Olsen, 2005).

I expect that these two mechanisms will enable organizational ideology to

influence strategic decisions by reinforcing the personal convictions of decision-makers,

if they share those beliefs. When decision-makers do not share the prevailing beliefs, they

may still feel compelled to act in a manner that is consistent with the prevailing

normative beliefs in the firm. As a result, in liberal firms with prevailing beliefs about

shared responsibility, decision-makers will be much more immune to using firm

underperformance as a reason to divest individual business units. Due to prevailing

conception of the firm as a cooperative entity, decision-makers in liberal firms will

interpret underperformance as an outcome of firm-level processes, not unit level factors,

reducing the likelihood that a unit will be divested after a period of underperformance.

Moreover, the prevailing view in liberal firms will posit firm’s structures and routines

(e.g. employment policies, boundary-spanning units, work culture) to be integrative,

leading managers to perceive high costs of divestiture.

In contrast, decision-makers in conservative firms, with prevailing conception of

the corporation as an internal market, will be inclined to locate the source of problems by

evaluating the prospects of each business unit separately. In this process, decision-makers

will perceive merit in retaining and supporting certain businesses from the corporate

portfolio of businesses, and divesting certain others, to recover during the period of

underperformance. In sum, a firm’s liberal (conservative) ideology will weaken

(strengthen) the association between firm underperformance and the likelihood of

divestiture.

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Hypothesis 1: The positive effect of firm underperformance severity on the likelihood of business unit divestiture will be weakened by organizational liberalism.

3.2.2. The Moderating Effect Of Ownership Dispersion

Ideology will manifest in firm’s decision-making to the extent corporate

executives have discretion on the firm decisions. Firms vary considerably in the extent to

which managers have latitude in making strategic decisions (Hambrick and Finkelstein,

1990). Of all the factors that constrain (enable) executive discretion, concentration

(dispersion) of the firms’ ownership has been shown to matter a great deal (McEachern,

1975; Khan, Dharwadkar and Brandes, 2005; Hambrick and Finkelstein, 1995).

Managers are known to have relatively little control over firm’s strategic decisions when

a few large investors own a majority of firm’s stock, and occupy positions on the

company’s board. These large owners may exercise their influence directly by expressing

disapproval for decisions made by managers, and indirectly by constraining decision-

makers’ perceptions of which decisions will meet with board’s approval. Firms wherein

the ownership is more dispersed, owners lack motivation and ability to monitor the

decisions of the management, allowing executives’ to exercise considerable discretion

over firm’s decision-making.

Since organizational ideology is likely to exert its influence by nudging decision-

makers toward choices that align with the dominant ideology, I anticipate ideology to

manifest on decisions to divest business units to the extent managers have discretion, as

determined by the ownership dispersion. Specifically, for firms with relatively dispersed

ownership, decision-makers’ will have greater ability to act in accordance with the norms

of liberal ideology, and resist divestment of business units following the period of firm

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underperformance. For firms with concentrated ownership, liberal ideology will not

matter as much because powerful owners will actively build pressure on managers to

respond to the widely perceived need to take action to improve performance. In sum,

presence of a dispersed ownership will provide boost to managers’ decisions-making

latitude, strengthening the attenuating effect of organizational liberalism on the

relationship between firm underperformance and firm’s propensity to divest business

units.

Hypothesis 2: The higher the dispersion of a firm’s ownership, the more organizational liberalism will attenuate underperformance and business unit divestiture association.

3.2.3. The Moderating effect of the Relatedness in firm’s portfolio

In addition to managerial discretion, the effects of organizational ideology may

also depend on the extent to which business units are related in terms of product-market

overlap. A number of studies have shown that decision-makers actively consider

relatedness, conceptualized as product-market overlap, among the business units as an

important factor driving their willingness to divest (Patton and Duhaime, 1978; Duhaime

and Grant, 1984; Bergh, 1995; Zuckerman, 2000). When greater relatedness is apparent

due to commonalty in the product markets that a firm operates in, it raises barriers for

firms to divest their business units (Harrigan, 1981; 1985). Yet research suggests that

interdependencies among business units among can be both express – due to product-

market overlap, and tacit – due to shared knowledge, routines, and identity, and it is the

tacit ones that are often harder for decision-makers to appreciate (Bergh, 1997; Feldman,

2014).

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I expect that when relatedness due to market overlap in firms portfolio of business

is higher, organizational ideology will have less of an occasion to influence divestiture

decision-making, as both conservative and liberal decision-makers may appreciate the

dependencies among business units, and see merits in avoiding divestitures. While liberal

firms, as argued earlier, may have a lower propensity to divest their business after

experiencing underperformance, the effects of liberalism may be particularly strong when

the interdependencies among business units are more tacit. While the lack of relatedness

may motivate decision-makers in conservative firms to divest business units in an effort

to improve firm performance, the effect of liberalism may find occasion to matter greatly

as the decision-makers will still believe that the tacit interdependencies among business

units will lead to a loss of firm value by causing disruption in the knowledge, routines

and processes of the entire firm. Therefore, I offer:

Hypothesis 3: The greater the relatedness in firms’ portfolio, the less organizational liberalism will attenuate underperformance and business unit divestiture association

3.2.4. Organizational Ideology and Selection of Buyers for Divested Business Units

Organizational ideology may not only affect a firms’ decision to engage in

divestitures, but also affect the fate of the divested unit. Prior research suggests that

firms’ decision to divest their units often involves discussions about whether the buyer

has the potential to be a “better parent” (Lee and Madhavan, 2010). Assessment of

suitability of the buyer may be deemed important by some firms due to concerns about

the fates of employees in divested units, motivation of employees in the parent company,

and maintenance of the positive social identity of the divesting firm. These assessments

may be particularly important because buyer firms are known to vary considerably in

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how they treat the businesses that they acquire. While some buyer firms indicate the

intent and capabilities to nurture the acquired business by integrating them with their

existing business portfolio, other buyer firms may engage in dismissal of employees of

acquired businesses and dissolving or selling off acquired businesses.

While existing research in business unit divestitures has largely overlooked the

factors that affect a firm’s choice of buyers, researchers interested in the opposite aspect

of the divestiture transaction, i.e. acquisitions, have highlighted the reality that the

attributes of buyer firm correspond with what happens to the divested unit. In this regard,

the distinction between purchase of divested units by private equity firms and industry-

outsider firms seems particularly important, as there are stark differences in their

motivations to acquire business units (Andrade and Kaplan, 1998; Kaplan and Stromberg,

2008; Davis et al., 2011). Scholars have noted that private equity firms acquire business

units with the goal to obtain short-term returns by promptly instilling efficiencies, and

selling the acquired business unit or parts thereof at a higher price (Kaplan and

Stromberg, 2008). As part of a private equity firm’s cost-cutting efforts, existing

employees of the acquired units are often laid off shortly after the acquisition (Acharya

and Kehoe, 2008; Gadiesh and MacArthur, 2008), retiree benefits of employees are

eliminated, and aggressive management practices based on strict performance incentives

are introduced (Bloom, Sadun and Van Reenen, 2009).

In contrast to private equity firms, industry outsider firms tend to acquire business

units with a long-term view of value creation by foraying into a new product markets.

While other acquiring firms (private equity and firms in the same industry) are often

motivated to acquire when decision-makers in those firms perceive a potential for short-

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term profiting through cost reduction and exploiting economies of scale (Markides and

Williamson, 1994), industry outsider firms tend to acquire units with the purpose of

exploring new product markets by harnessing unit’s strategic resources (physical,

technological, human and social) (Seth, 1990). Even though acquisitions by industry

outsider firms, on average, tend to be riskier (Bergh, 1997), they are less often

accompanied by workforce reductions (Capron, 1999; Krishnan, Hitt and Park, 2007),

suggesting that divesting to industry-outsider firms may indeed promise better future for

the newly acquired unit and its employees. Given that firms tend to have substantial

discretion in choosing the buyer for divested units, and that the choice of buyers

determines the fate of the business, what predicts variation in firms’ propensity to sell a

business unit to private equity firm vs. industry-outsider firm?

I propose that ideological conservatism-liberalism of the firm may explain

differences in firms’ choice of buyers. I anticipate decision-makers in liberal firms, owing

to members’ preference for shared responsibility and prevailing conception of the firm as

cooperative social entity, may find it appealing to sell the business unit to an acquirer

who shows intent and commitment to nurturing the business unit and its employees,

instead of selling to an acquirer whose purchase of the unit will result in dismantling of

the business and dismissal of employees. In contrast, decision-makers in conservative

firms, owing to the dominant conception of the firm as an internal market, may show less

concern for the fate of the divested business unit, as they may not perceive a sense of

responsibility toward it. Accordingly:

Hypothesis 4: The greater the organizational liberalism, the lower the likelihood that a divested business unit will be sold to a private equity firm.

Hypothesis 5: The greater the organizational liberalism, the greater the

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likelihood that a divested business unit will be sold to an industry-outsider firm.

3.2.5. Organizational Ideology and Post-divestiture Firm Performance

Another question that researchers in corporate strategy have long engaged with pertains

to the performance implications of divestiture activity. As described earlier, the findings

in this regard have been decidedly mixed. While a few studies have found a positive

effect of divestiture activity (Bergh, 1998; Hoskisson and Johnson, 1992; Markides,

1995), several others have found a negative effect on performance (Bergh, 1995;

Montgomery and Thomas, 1998). To explain the post-divestiture performance, scholars

have increasingly urged researchers to consider the factors that affected the decision to

divest in the first place (Park, 2002). For instance, Markides (1995) showed that only

pioneering divesting firms were able to improve their performance, whereas late, reactive

divesting firms failed to do so, Feldman et al. (2014) showed that family business firms

were able to generate greater profits from divestitures, as those firms were more likely to

pay attention to the costs of divestitures.

Adopting a similar logic, I argue that the value created by business unit

divestitures may be different for liberal and conservative firms. As argued throughout the

study, liberal firms are expected to subscribe to a conception of the firm as a cooperative

social entity, and be more likely to accept collective responsibility for the firm and its

constituents. As a result, decision-makers in liberal firms will be more mindful of human

and social costs, which often accompany divestitures of business units, and be willing to

divest a business unit only when the foreseeable benefits of divestiture far outweigh the

sum total of different types of costs. As such, it can be expected that decision-makers in

liberal firms will divest either when the human and social costs involved in divestitures

! 73!

are really low, perhaps due to clear signs that the unit will do better after acquisition, or

when the financial benefits are significant enough to compensate for other intangible

costs (e.g. lowered employee morale). In contrast, decision-makers in conservative firms

will be willing to divest when the perceived benefits exceed the generic market costs of

the transaction. These ideological differences will create patterns of divestiture behaviors

in which liberal firms divest only when significantly higher returns from business units

are expected. This leads me to hypothesize:

Hypothesis 6: The greater the organizational liberalism, the higher will be the post-divestiture firm performance.

3.3. METHODOLOGY

3.3.1. Sample

I examined divestitures by Fortune 500 multi-business corporations during the

period 2001-2013. Studying this group of large public corporations was suitable as the

data on my measure of organizational ideology is limited in availability for smaller firms.

Also, given that Fortune 500 firms experience considerable institutional pressures that

limit their discretion, it allows me to put my theory to a stringent test, as one would

expect ideology to manifest more clearly in smaller firms. This observation period is

particularly suitable as during this time divestiture activity in corporate America was at

all-time high (Gehman, 2012).

The data on completed divestiture deals was obtained from Security Data

Corporation’s (SDC) Mergers and Acquisitions databases, and financial variables were

obtained from Compustat database. I included all the firms headquartered in the United

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States. After accounting for missing data, I analyzed an unbalanced panel of 5,512 firm-

year observations to predict the likelihood of divestitures.

3.3.2. Dependent Variables

Business unit divestiture. The dependent variable was dichotomously coded to

indicate the incidence of divestiture events in a given firm-year observation. To ensure

availability of financial data on firms, I used a two-step procedure to identify a divestiture

event. First, I identified the firm-year observations in the Compustat database in which

firms experienced an overall reduction of the workforce or total assets from year t-1 to

year t. In the second step, I matched those observations to data on the value of deals as

mentioned in SDC Platinum database to ensure that the transactions represented a sizable

business unit, not just a single plant or machinery. I only considered those divestiture

events in which the value of transaction was at least 5% of the value of the total assets of

the firm in year t-1. In robustness checks, I found consistent results using cut-offs of 1%

and 10%. After applying these filtering criteria, I analyzed a total of 300 divestiture

events. Figure 9 describes the number of divestitures undertaken by companies that

divested at least once during the study window. Figure 10 summarizes the number of

divestitures during each year in the study window. Figure 11 shows the frequency of

divestitures across six industrial sectors.

Sale of a unit to a Private Equity Firm. This variable was coded as a

dichotomous measure in which 1 represents the events in which a private equity firm was

the buyer, and 0 represents all other buyers. Private equity firms were identified by

manually going through the business descriptions of acquirer firms as mentioned in the

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SDC Platinum database. Firms that were listed as “investment firms” “investor firm” or

“investors” were considered private equity firms. For a randomly selected subsample of

30 firms, I manually verified this operationalization using the list of 300 biggest private

equity groups from Private Equity International and found them to be consistent. Of the

300 divested units, private equity firms bought 104.

Sale of a Unit to an Industry-Outsider Firm. Using data available from SDC

Platinum, this variable was dichotomously coded to represent the instances in which the

acquirer firm was not a private equity firm and had no overlap with the divesting firm’s

SIC code. An alternative conceptualization of including buyer firms with the same first-

digit-SIC (in addition to no SIC overlap firms) yielded qualitatively similar results. Of the

300 divested units, 56 were sold to industry-outsider firms.

Post-Divestiture Performance. Following the recent study by Feldman et al.

(2014), I coded the performance of the firm by subtracting Tobin’s q in year t from

Tobin’s q in year t+1. It is worth noting that Tobin’s q is the most commonly used

measure of post-divestiture performance, as it is considered superior to accounting

measures, such as ROA, for capturing the benefits (if any) of corporate restructuring.

Studies have shown that the benefits of divestitures often take much longer to become

fully discernible in accounting measures of firm performance.

3.3.3. Independent and Moderator Variables (measured in t-1 unless otherwise noted)

Organizational Ideology. As described earlier in this dissertation, I measured

political ideologies of Fortune 500 firms using a multi-item index of political

contributions by employees. This measure treats donations to the Republican Party as

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conservative leaning and donations to the Democratic Party as liberal leaning. This

measure allowed me to assign a score to every firm on a scale ranging from 0 (indicating

low liberalism or high conservatism) to 100 (indicating high liberalism or low

conservatism). To predict the occurrence of a divestiture event in a given firm-year, the

index of organizational ideology was computed using the average of employee political

donations for the two most recent election cycles. For example, the average of

employees’ donations in the year 1998 and 2000 were used to predict firm’s divestiture

behavior in 2001.

Ownership dispersion. This measure reflects the percentage of firm’s stocks not

held by institutional shareholders and block stockholders.

Portfolio Relatedness. This variable was captured as by Palepu’s (1985) measure

of relatedness diversification, using an entropy measure based on firms’ dispersion of

sales across 4-digit SICs (within the firm’s 2-digit SICs).

Underperformance severity. This measure was coded to reflect the extent to

which the underperformance (measured using return on assets) of a firm in a given year

deviated from the sample mean performance in absolute terms. Consistent with research

suggesting that major organizational changes are primarily affected by poor performance,

(Boeker, 1992), this variable was coded as 0 for those firm-year observations in which

performance was higher than the sample mean.

3.3.4. Control variables. (measured in t-1 unless otherwise noted)

Depending on the dependent variable, a number of control variables were added to

capture common correlates of business unit divestitures:

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While I included Underperformance severity as a key independent variable to

capture the effect of firm underperformance on divestiture activity, I controlled for High

Performance severity, which was coded as absolute performance deviation (using return

on assets) from the sample mean performance for cases where firm performance

exceeded the sample mean, and 0 otherwise. In models predicting selection of the buyer

and post-divestiture performance, I replaced performance severity splines with a single

measure of Return on Assets. I controlled for Unrelatedness in parent firm’s portfolio

using an entropy measure of unrelated diversification (Palepu, 1985). To assess the

effects of a parent firm’s debt position to likelihood of divestiture, I included a measure

of debt-to-equity ratio, computed as total long-term debt over market value of equity

(Chang and Singh, 1999). To capture differences due to size, I will control for firm size,

measured as the log of total firm sales. To capture differences in the perceived future

prospects of the firm, I controlled for Tobin’s q, measured as the market-to-book ratio of

the firm. Following Chin et al. (2013), I included a measure of CEO liberalism as CEO

may have a more direct influence on firm’s divestment decision. For each firm-year, I

used donations made the CEO over the past ten years. Lastly, I included fixed effects for

Calendar Years in the models predicting the likelihood of divestiture. Fixed effects for

six industrial sectors (high-tech, natural resources, consumer products, utilities, financial,

and other services) were included in all the models.

3.3.5. Estimation Methods

I used Probit models to predict the likelihood of divestitures, and selection of

buyers (private equity or industry-outsider firms). I used Ordinary Least Square models

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to predict post-divestiture firm performance. To account for endogeneity, I used a two-

stage Heckman selection procedure, which produces an inverse-mills ratio from the

estimates in the first stage model (predicting divestitures), which was then added to all

the second stage models (predicting selection of buyers, and post-divestiture

performance). The second stage models for firm’s choice of buyers only included the

completed divestiture deals (N=300). Models predicting post-divestiture performance

included completed divestiture deals minus the missing observations on the dependent

variable (change in Tobin’s q), providing a sample of 263 divestiture events.

In robustness checks, I reran the models predicting occurrence of divestiture using

discreet-time Event history analysis with repeated events, which accounts for the time

duration until one or more events happen. These analyses (available upon request)

produced highly consistent results.

3.4. RESULTS

Table 7 presents descriptive statistics (means, standard deviations, and

correlations) among our variables at the firm-year level (N=5,512). Table 8 presents the

same descriptive information for the completed divestiture deals (N=300). Table 9

presents regression results for my tests of the effects of organizational ideology on firm’s

likelihood of engaging in divestitures of business units. Table 10 and 11 report results for

the choice of buyer type for completed divestiture deals, and post-divestiture firm

performance respectively. Additionally, I plot the results of significant interaction terms

to allow for clearer interpretation of my findings.

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As shown in Model 1 of Table 9, my baseline findings reaffirm the findings in the

prior research that underperformance is a highly significant predictor of firms’ propensity

to engage in divestiture of business units (Duhaime and Grant, 1984). Firm’s slack

resources (captured by Debt-to-Equity Ratio) and portfolio unrelatedness were also

significant predictors of business unit divestiture. Hypothesis 1 predicted that

organizational liberalism would weaken the negative relationship between a firm’s

underperformance severity and divestiture of a business unit. The results in Model 2

show a significant positive effect (p<.05) for the interaction of organizational liberalism

and the firm’s Return on Assets, providing strong support for Hypothesis 1. Figure 12

provides visual evidence for this finding. Interestingly, while I expected liberalism to

weaken the underperformance-divestiture relationship, the findings suggest that liberal

firms don’t show any relationship between underperformance and divestiture.

Model 3 tests Hypothesis 2, which stated that the attenuating effect of

organizational liberalism on the underperformance-divestiture relationship is weakened

by ownership dispersion. The coefficient for the three-way interaction between

underperformance severity, organizational liberalism, and ownership dispersion was not

statistically significant, showing a lack of support for this hypothesis.

Model 4 tests Hypothesis 3, which posited that the attenuating effect of

organizational liberalism on the underperformance-divestiture relationship is weakened

by relatedness in firm’s portfolio of businesses. The coefficient for the three interaction

between underperformance severity, organizational liberalism and ownership dispersion

was negative and significant (p<.05 in Model 5), suggesting strong support for

Hypothesis 3. To aid interpretation, I graphed the effect of attenuating effect of

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organizational liberalism on the underperformance-divestiture relationship for firms with

high and low relatedness in their portfolio of businesses (Figure 13a and 13b). The

greater slope differences between liberal and conservative firms under condition of low

relatedness, compared to condition of high relatedness, vividly illustrate my finding that

the effects of organizational ideology on firms’ divestiture behavior are much more

pronounced when the business units are not related.

Model 2 in Table 10 tests Hypothesis 4, which proposed that liberal firms will be

less likely to sell their business units to private equity firms. The coefficient for

organizational liberalism variable was not significant, suggesting a lack of support for

Hypothesis 4. Model 4 in Table 10 tests Hypothesis 5, which anticipated that liberal firms

will exhibit a greater likelihood of selling their business units to companies outside of the

focal firm’s industry. The coefficient for organizational liberalism variable was positive

and significant (p<.05), suggesting strong support for Hypothesis 5. In Model 5, I

replicated these findings using Multinomial logistic regression, which enables modeling

of multiclass problems, i.e. situations with more than two discrete outcomes. Using the

sale of unit to other firms related to firm’s focal industry as the base category, I modeled

the factors that predict the sale of private equity firms and sale to industry-outsider firms.

Consistent with model 4, I found that liberal companies were more likely to sell their

divested unit to industry-outsider firms as compared to selling it to other firms. Again, no

ideological differences were observed in firms’ likelihood of divesting to private equity

firms and other public firms.

Lastly, Model 2 in Table 11 tested Hypothesis 6, which predicted that the liberal

firms will obtain greater returns from business unit divestitures than their conservative

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counterparts. Conceptualizing post-divestiture performance in terms of change in Firm’s

Tobin’s Q from year t to year t+1 (Feldman et al., 2014), I find that the variable for

organizational liberalism positively and significantly predicted post-divestiture

performance (p<.05 in Model 2), supplying strong support for Hypothesis 6. In analysis

not reported, I analyzed post-divestiture performance in terms of increases in return on

assets from year t to year t+1, and did not observe significant differences between liberal

and conservative firms, suggesting that the performance differences could be driven by

boost in market perceptions of firm value.

In additional analyses not reported here, I tested whether the interaction between

organizational liberalism (by itself, and separately measured for top executives) and CEO

liberalism significantly predicts any of the divestiture behaviors and outcomes examined

in this study. I also considered whether the ideological differences in divestiture behavior

observed in this study are partly driven by differences in how liberal and conservative

companies structure their portfolio of businesses in the first place. In particular, I

examined whether ideology was correlated with the relatedness among business units or

the number of business units itself. None of these analyses produced any significant

findings.

The findings of this study were also substantial in terms of their effect size. In the

analysis predicting likelihood of divestiture, I observed that relatively liberal firms

(liberalism score of 70) has 5.6% probability of divesting during a period of severe

underperformance performance (-1 S.D. on Return on Assets), significant less than that

of relatively conservative firms (liberalism score of 30), which had 8.6% probability of

divestiture. Moreover, while liberal firms’ (70) propensity to divest dropped to 3.8%

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when the relatedness within firm’s portfolio was low, conservative firm’s (30) propensity

increased to 10.4%. In the analysis for testing Hypothesis 4, I find that, as compared to

conservative firms (30), liberal firms (70) were 223.08% as likely to divest a business

unit to industry outsider firms. In the analysis to test Hypothesis 6, the findings suggest

that liberal firms had an increase of .25 in Tobin’s q, which is two-third of a standard

deviation of the dependent variable (change in Tobin’s q). Conservative firms did not

show any performance increase at all.

Taken together, these results suggest that organizational ideology is a potent

determinant of firm’s divestiture behavior, choice of buyers, and post-divestiture

performance.

3.5. DISCUSSION

This study examined the idea that the corporate strategy of Fortune 500 companies is

strongly influenced by organizational ideology, which represents the aggregate political

beliefs among organizational members. In particular, this study represents the first

investigation of the influence of political ideology on a crucial arena of strategic

decision-making – business unit divestitures. Building on the most cumulative finding in

the divestiture research – that firm underperformance leads to divestitures (Duhaime and

Grant, 1984; Brauer, 2006) – I hypothesized that firms’ willingness to divest business

units will depend on the prevailing ideology of liberalism vs. conservatism. I theorized

that more liberal firms, due to prevailing views in favor of collective responsibility, will

subscribe to the notion that the firm is a cooperative social entity with high

interdependencies among different business units. In contrast, more conservative firms,

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with prevailing preference for individual responsibility, will conceive of the firm as an

internal market, with low interdependence and highly dispensability of business units. I

expected that these contrasting views will translate into decision-makers’ willingness to

divest business units to remedy poor performance, particularly when decision-makers

have higher managerial discretion due to dispersed firm ownership, and when firm’s

portfolio of businesses have low relatedness. I further hypothesized that differences

among liberal and conservative firms would also manifest in firm’s choice of buyer for

the divested unit, such that the liberal firms will be particularly attuned to selling the unit

to firms outside of the industry, and less inclined to divest to private equity firms, which

often dismantle the units to maximize the returns. Lastly, I hypothesized that liberal firms

may reap greater returns from business unit divestiture as the decision-makers in liberal

firms may only divest when expected returns from divestiture far outweigh the financial,

social and human costs involved in divestiture process.

The results indicate strong support for my primary expectation that the more

liberal firms show greater resistance to engaging in divestitures as a response to

underperformance than the more conservative firms. In fact, it appears that for liberal

firms, there is no association between firm performance and divestitures. Given that

almost half of the business unit divestitures were still undertaken by liberal firms, my

analysis alludes to the possibility that liberal firms may undertake divestitures for reasons

other than poor performance – a finding that begs further investigation. My hypothesis

about the moderating effect of managerial discretion was not supported, i.e. differences in

liberal and conservative firms’ propensity to divest in response to underperformance did

not differ under conditions of low vs. high ownership dispersion. This points to the

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possibility that when it comes to divestiture decision-making, firm owners may place

credence on managers’ judgment, as managers are known to have access to superior

information than the other actors in the marketplace (Williamson, 1975). My hypothesis

about the moderating effect of relatedness was strongly supported, such that the

difference between liberal and conservative firms existed only when there was low

relatedness in firm’s portfolio of businesses, suggesting that ideology matters for

divestiture decisions only when the interdependencies among businesses are tacit, and not

due to product-market overlap. When there is high relatedness (i.e. product-market

overlap), firms’ across ideological spectrum exhibit similar reluctance to divest.

My analysis of the effect of organizational ideology on firm’s choice of the buyer

also yielded interesting findings. Results suggest that liberal firms were indeed more

likely to sell the divested unit to industry-outsider corporations, which may indicate

greater potential to nurture the business unit. However, the hypothesized effect of firm’s

conservatism (lower liberalism) on the sale of the business unit to private equity firms

was not supported and is in need of further investigation. Lastly, I found strong support

for my hypothesis about how organizational ideology may have implications for post-

divestiture performance of business units, further providing evidence that there are

systematic differences in the factors that instigate liberal and conservative firms to

engage in divestiture.

The combined results of this study offer an ideological perspective on when firms

reconfigure their boundaries, how they do it, and what happens next. It seems that the

conservative companies act according to the most common finding in the extant

divestiture research, i.e. they divest after experiencing underperformance. While the

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reasons for when and why liberal companies divest are unknown and in need of further

investigation, it appears that their decision-making involves greater concern for the well-

being of the divested unit and its employees. This is reflected in the finding that, relative

to conservative companies, liberal companies are much more likely to sell the unit to

firms outside of their industry as industry-outsider firms are less likely to engage in

workforce reductions after purchasing the unit. It also appears that their concerns for

social and human costs involved in divestiture process also leads liberal companies to

reap greater returns after engaging in business unit divestiture.

3.5.1. Implications and Future Research

This study has crucial implications for research in corporate strategy in general and

business unit divestitures in particular. While prior research has overwhelmingly adopted

an economic perspective to analyze the causes of divestitures, scholars have increasingly

urged researchers to consider the cultural and normative factors that affect firm’s

likelihood of engaging in divestitures (Davis and Stout, 1992; Davis, Diekman and

Tinsley, 1994). This study takes an important step in that direction by considering the

ideological bases of firm’s business unit divestiture behavior. By showing that liberal and

conservative firms systematically differ not only in their propensity of divest business

units as a response to poor firm performance, but also whom they select as the buyer, and

how firms perform after divestiture, this study covers considerable ground in expanding

scholarly understanding of strategic decision-making.

This study also contributes to growing body of literature in management and

finance that has highlighted the importance of political ideologies of executives (Chin et

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al., 2013; Briscoe et al., 2015; Christensen et al. 2015), corporate boards (Lee, Lee and

Nagarajan, 2014) and firm as a whole (Gupta et al., 2015). As such, this study contributes

to the literature on “political ideology in organizations”, by demonstrating its effects on a

crucially important, yet hitherto overlooked, context of business unit divestitures.

As with any study, this study has some limitations that future research can help

overcome. First, the research design of this study does not allow me to observe the micro-

processes that inject the influence of organizational ideology on firm’s strategic decision-

making. While I follow in the footsteps of prior studies in explicating how the social-

psychological mechanisms of motivated cognition and logic of appropriateness may lead

organizational ideology to exert its influence (Gupta et al., 2015), future research may

examine the relative influence of those two mechanisms, or presence of other

mechanisms that may provide an explanation for the findings of this study. For instance,

scholars may explain whether the prevailing ideology of the firm enters through a

bottom-up processes in which choices that are at odds with prevailing political beliefs are

winnowed down as they reach the desk of the CEO, or a top-down process in which

decision-makers feel normative pressure to be consistent with prevailing beliefs, or

whether senior executives perceive higher financial costs to act in opposition to the

dominant ideology, a logic of consequence. Given the inherent limitations of archival

research, field research in the form in-depth interviews, and participant observations may

be particularly helpful in exploring these possibilities.

Another topic worthy of investigation is reconciling the findings of this research

with the tenets of upper echelon theory (Hambrick and Mason, 1984), which has

emphasized the importance of senior executives’, particularly CEO’s, preferences in

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explaining strategic behavior of corporations. In this study, organizational ideology

superseded the effects of CEO political ideology in explaining firm behavior. Future

researchers may shed light on contingencies that affect the relative predictive ability of a

CEO’s ideology and organizational ideology.

While this study, for the first time, begins to advance an “ideological theory of the

firm,” scholars can further unpack the systematic influence of organizational ideology on

how firms’ buy and sell their business units and, in the process, reconfigure their

boundaries. Future research may examine whether some firms “buy to sell,” displaying a

pattern of ongoing boundary reconfiguration vs. focusing on organic growth in firm’s

portfolio as means of achieving economic value creation. Further, scholars may examine

whether and how prevailing ideologies affect the perceived fluidity of firm’s boundaries

in the minds of decision-makers, shaping their willingness to alter those boundaries based

on the requirements of the task at hand.

Lastly, findings of this study can be significantly bolstered if future researchers

are also able to examine the business unit level factors in predicting firm’s divestiture

behavior. Since fine-grained data on business units is harder to obtain through archival

sources, researchers may consider alternative methodologies, such as organizational

surveys (e.g. Tsai, 2001), to unpack the unit level dynamics as theorized in the present

study. For instance, scholars may examine the sources of tacit interdependencies due to

shared knowledge, routines or identities, that cause liberal firms to resist engaging in

divestitures despite the absence of relatedness (due to product-market overlap) in a firm’s

portfolio.

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Chapter 4

DISCUSSION AND CONCLUSION

4.1. Broad Overview of Findings

This dissertation consisted of one theoretical chapter and two empirical studies.

While each of the two empirical studies examined distinct domains of management

research, as a collective, this dissertation sought to examine the overarching question:

How does organizational political ideology affect firm’s market and non-market

behavior? To address this question, the first chapter laid down the conceptual

groundwork for what organizational ideology is, and how it affects decision-making. To

do so, I drew on classic research in organizational theory that had deemed organizational

ideology to be highly consequential for firm behavior and performance (Selznick, 1949;

Kamens, 1977; Beyer, 1981). I explicated the relevance of organizational ideology for

modern for-profit corporations in the United States by integrating insights from research

in political psychology and political science that have shown the liberalism-conservatism

to be a potent way of categorizing ideologies. Although my research does not allow me

observe the operating mechanisms that underlie the effect of organizational ideology on

decision-making, I explicated two potential mechanisms: motivated cognition (Higgins

and Molden, 2003), and logic of appropriateness (March and Olsen, 2005) that seem to

be at play.

The second chapter investigated the ideological underpinnings of firm’s responses

to activist protest, testing the extent to which liberal and conservative firms rely on

substantive versus impression-management based strategic responses to protest by

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activist stakeholders. I hypothesized that firms with prevailing ideology of liberalism are

likely to show greater willingness to concede to activist demands, because liberal

ideology states a preference for equality, social change and shared responsibility, whereas

companies with conservative ideology may instead rely on impression-management

responses, as conservative ideology upholds the principles of individual responsibility

and maintenance of status quo. I further investigated whether the differential effects of

liberal and conservative ideologies may be more pronounced for secondary stakeholders,

which tend to have low salience for decision-makers. Lastly, I also hypothesized that the

highly liberal and highly conservative companies would experience greater instances of

activism levied against them than ideologically moderate companies. Although not all

hypotheses were supported, the results broadly show support for my expectations that

organizational ideologies of liberalism and conservatism provide explanations for

strategic interactions among firms and activists.

The third chapter considered the influence of organizational ideology on a crucial

market behavior of corporations – business unit divestitures. I explore the implications of

organizational ideology on three important domains in divestiture decision-making: how

organizational ideologies of liberalism and conservatism affect firm’s likelihood of

engaging in divestitures as a response to underperformance, how ideologies affect whom

a business unit is divested to, and how well the firm performs after engaging in

divestiture. Based on the idea that liberal and conservative ideologies support different

conceptions of corporations – as a cooperative social entity or an internal market due to

underlying differences in beliefs about and preferences for individual vs. collective

accountability (Tetlock et al., 2014), I hypothesized that the more liberal companies will

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be mindful of tacit interdependencies among different units within the firm, and

consequently, exhibit greater resistance to divest business units during periods of poor

firm performance. I further hypothesized that the liberal firms will be more likely to sell

the divested units to firms outside of the industry as those firms are likely to preserve and

nurture the unit and its employees, and less likely to sell to private equity firms, which

often dismantle the unit for short-term gains, and cause considerable turbulence to

employees’ careers. Lastly, I expected that the liberal firms’ ex-ante tendency to not

divest business units in response to poor performance, would lead them to attain higher

post-divestiture performance. The results provide considerable evidence to my

hypotheses. Even though some hypotheses were not supported, the overall findings are

consistent with the ideas put forth in this study.

4.2. Future Research Direction

My dissertation contributes to research in organizational theory and strategy by

illustrating the ideological foundations of firms’ market and non-market behavior. By

conceptualizing organizational ideology in term of prevailing political beliefs among

organizational members, it opens up numerous avenues for further research on the topic.

For instance, while this study urges scholars to consider the preferences of the “lower

echelons” of organizations, there exists considerable potential for its integration with the

dominant “upper echelons” perspective (Hambrick and Mason, 1984) by addressing

questions like: 1) how is it that liberal companies come to have conservative executives

and vice versa; 2) do executives’ political ideologies serve as magnets for attraction of

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ideologically similar organizational members or the other way round; 3) do ideologically

driven strategies and practices further reinforce the ideological bent of the firm; 4) do

ideologically incongruent practices dilute the ideological make-up of the firm.

Building on the second chapter, scholars may further examine how organizational

ideology affects responses to activism based on ideologies of activist groups. While I did

not observe much variation in the ideological valence of issues reflected in activist

protests, scholars may look at other forms of activism, such as consumer boycotts (King,

2008; McDonnell and King, 2012), which may allow researchers to exploit greater

variation in ideologies of activist groups. Scholars may further explore whether

conservative (liberal) organizations are more likely to incorporate the input from

conservative (liberal) activists, or whether the findings of this study operate irrespective

of political leaning of activist groups.

Social movement researchers may also consider how organizational ideologies

matter for firm responses to different issue types. It would be interesting to tease apart

whether liberal firms respond to issues aligned with their liberal ideology or whether they

are generally more open to influence. While the current research argues for the effect of

liberalism on firm’s general openness to external constituents, there may be some

important contingencies to this proposition. For example, it is possible that decision-

makers in liberal firms may not respond to conservative or ideologically neutral issues if

their implementation involves incurring high social and reputational costs.

Organizational ideology may provide contributions to research at the intersection

of social activism and inter-organizational diffusion. Scholars may examine whether

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liberal and conservative firms rely on different sources of information to assess the

legitimacy of practices advocated by activists (Brisoce, Gupta and Anner, 2015). At the

level of organizational field, scholars may examine whether diffusion of activist-led

practices operates through the principles of homophily, such that liberal (conservative)

companies look to other liberal (conservative) companies to evaluate the merits of

activist-led practices, or whether there are asymmetries embedded in the process.

Scholars of corporate strategy may extend the investigation of organizational

ideologies on other boundary re-configuring activities of corporations. For instance,

future research may examine whether liberal and conservative firms differ in their

reliance on strategic alliances or mergers and acquisitions as part of their strategic

behavior. Are they more likely to select ideologically similar firms as alliance partners?

Do they have different degrees of success based on their ideological match with the

alliance partner firms?

This study adopted the conceptualization of organizational ideology on

liberalism-conservatism axis, which has been widely validated by scholars in political

psychology and political science (Poole and Rosenthal, 1984; Jost, 2006). Yet scholars

have anticipated that this axis will perhaps need to be adapted to suit other nation

contexts outside of the United States (Jost, 2006). For instance, Simons and Ingram

(1997) posited the relevance of Socialism-Capitalism axis for categorizing ideologies of

Israeli kibbutzim. Future researchers across the world may find utility in adapting this

conceptualization and measurement to diverse contexts.

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There are also empirical refinements that future researchers may consider. While

this dissertation utilized a simple measure that aggregates employees’ donations to the

two major parties in the United States, scholars may nuance this measure to consider

within-group differences in the ideologies of the donors to the same party, Democratic or

Republican. One promising avenue for researchers could be to weight the political

contributions by ideological stances of different recipients (Poole and Rosenthal, 1984).

In cases, where ideological stance of recipients is not known, perhaps because they don’t

hold an elected office, scholars may employ more sophisticated methodologies to infer

political stances based on co-donation patterns (e.g. Bonica, 2013; Bonica, 2014).

Further, while my measure was robust to the number of records that it is made up of,

scholars may examine the causes and consequences of variation in the number of

employees who make political contributions.

Another useful refinement to this measure could be to examine the variation in

ideologies within the firm. Gupta et al. (2015) point out that a large number of the firms

are actually ideologically moderate, or “purple.” Future researchers may explore whether

such firms are uniformly moderate across all business units and locales, or whether they

are more balkanized (i.e. some units and liberal and others are conservative). These

patterns of organizational ideologies may matter above and beyond the aggregate beliefs

in the firm. For instance, scholars may study whether firms more likely to divest units

that are ideologically dissimilar to the rest of the firm, or whether balkanized firms are

more likely to provide structural openings for social activists to mobilize and/or exert

their influence (Eisenger, 1973).

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Lastly, while study has benefitted from the public availability of political

contributions data on by a large number of employees, future researchers may consider

the possibility of using other data sources to capture the organizational ideologies.

Following the advice of Webb and Weick (1983), scholars may examine other trace

indicators that may offer a glimpse into prevailing values and beliefs in the firms. These

may include textual analysis of corporate documents, executive speeches, concrete HR

policies, demographic makeup of the workforce, and employee exit interviews. These

efforts may be particularly useful for studying ideologies in other countries.

4.3. Conclusion

In the two empirical studies included in this dissertation, I have investigated the

influences of organizational political ideology on firms’ market and non-market

behaviors. The collective goal of this dissertation was to highlight that prevailing values

and beliefs of members of corporations affect behaviors and practices that are

overwhelmingly viewed as outcomes of rational cost-benefit calculus. The findings

across both studies shed light on how political ideologies of organizations can serve as

basis for how firms formulate their non-market strategies to manage the influence of

activist stakeholders, and how firms reconfigure their boundaries to attain long-term

effectiveness. In sum, this dissertation makes important contributions to domains in

strategy and organizational theory by exploring the influence of organizational political

ideologies on various strategic decisions and outcomes and by highlighting fruitful

avenues for future research.

! 95!

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APPENDIX A: TABLES

Table 1. Correlations and Descriptive Statistics for Activist Protest Analyses (protest-event level)

Variables Mean S.D. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22)

(1) Concession^ .22 .41

(2) Pro-social claims^ 3.32 6.55 -.14

(3) Prosocial claims (prior)^ 3.07 5.89 -.07 .68

(4) CSR Profile (t+1) -.16 2.40 .09 -.29 -.20

(5) CSR Profile -.15 2.39 .17 -.29 -.20 .91

(6) Inverse Mills Ratio 1.22 2.92 .15 -.31 -.22 .26 .25

(7) Net Sales 13.26 14.69 -.17 .38 .28 -.26 -.26 -.87

(8) Return on Assets .05 .09 -.02 .13 .15 -.09 -.10 -.10 .21

(9) Organizational Prestige .30 .46 -.10 .26 .16 -.17 -.15 -.39 .54 .30

(10) Debt-to-Equity Ratio 1.49 1.21 -.01 .01 .00 .08 .01 -.07 .02 -.16 -.08

(11) Unionized workforce .27 .44 -.11 .46 .40 -.11 -.13 -.33 .50 .16 .47 .04

(12) Ownership Concentration .43 .28 -.07 -.00 .05 .08 .05 .35 -.20 .30 .02 .01 .05

(13) No. of SMOs involved^ .16 .45 .03 .00 .04 -.03 -.03 .02 .02 .14 .04 -.04 .02 -.00

(14) Protest size^ 2.68 1.76 .04 .02 .02 .01 -.03 -.03 .03 .09 .01 .04 .10 .00 .10

(15) Media Coverage to Protest^ 10.20 9.75 -.12 -.04 -.02 .14 .12 -.04 -.00 -.00 -.11 .02 -.14 .00 -.14 .06

(16) Institutionalized Practice^ .07 .26 .01 -.01 -.01 .03 .04 .01 -.03 .21 .16 -.06 -.08 .14 -.07 .09 .12

(17) Primary Stakeholder Protest^ .42 .49 .02 .07 .09 .15 .16 .04 -.06 -.02 .10 .10 .10 .05 -.16 .15 .06 .21

(18) Secondary Stakeholder Protest^ .58 .49 -.02 -.07 -.09 -.15 -.16 -.04 .06 .02 -.10 -.10 -.10 -.05 .16 -.15 -.06 -.21 -1.00

(19) Democratic President .51 .50 .06 .08 .12 .09 .14 -.26 .29 .09 .05 .01 .01 -.11 -.00 -.11 .15 .22 .01 -.01

(20) HQ State Liberalism 51.80 5.98 .13 -.22 -.17 .44 .48 .30 -.33 -.15 -.17 -.06 -.07 -.00 -.05 -.07 .02 -.07 .10 -.10 -.10

(21) Info Tech industry .23 1.00 .11 -.19 -.16 .20 .20 -.07 -.11 .12 -.07 .01 -.30 .06 -.13 .08 .18 .19 .15 -.15 -.01 .01

(22) CEO Liberalism 42.17 21.11 .03 -.15 -.10 .25 .28 .25 -.39 -.12 -.22 .06 -.06 .11 .06 -.02 -.02 -.05 .07 -.07 .03 .28 .12

(23) Organizational Liberalism 47.14 16.46 .22 -.15 -.11 .32 .38 .24 -.29 -.00 -.15 -.14 -.18 .18 -.12 -.15 .05 .15 .03 -.03 .25 .32 .23 .43

N=300 (protest events); Correlation of |.10| and above is significant at p<.10

^These variables were coded at the protest-event level; all others were at the firm-year level

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Table 2. Correlations and Descriptive Statistics for Activist Protest Analyses (firm-year level)

Variables Mean S.D. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)

(1) CSR Profile .10 2.45

(2) CSR Profile (t-1) .10 2.44 .81

(3) Inverse Mills Ratio 2.49 .55 -.02 -.01

(4) Net Sales 2.08 4.75 -.03 -.04 -.62

(5) Return on Assets .04 .08 .08 .07 .01 .08

(6) Best Company to work for .11 .31 .28 .27 -.21 .27 .09

(7) Debt-to-Equity Ratio 1.54 1.30 -.06 -.06 -.01 .00 -.15 -.01

(8) Unionized workforce .11 .31 .02 .02 -.26 .20 .02 .21 .04

(9) Ownership Concentration .60 .31 -.01 -.03 .30 -.12 .16 -.03 -.05 .01

(10) HQ State Liberalism 50.63 7.06 .21 .21 -.17 .00 -.02 .05 -.01 .04 .06

(11) Protest (all stakeholders)^ .04 .20 -.00 -.02 -.42 .50 .02 .13 -.01 .11 -.12 .04

(12) Secondary Stakeholder Protest^ .03 .16 -.03 -.04 -.33 .40 .02 .08 -.02 .06 -.10 .02 .75

(13) Primary Stakeholder Protest^ .02 .13 .03 .01 -.25 .30 .01 .11 .01 .10 -.07 .04 .64 -.02

(14) CEO Liberalism 39.45 26.91 .08 .08 -.17 -.03 -.05 .01 .02 .03 -.06 .22 .04 .03 .03

(15) Organizational Liberalism 43.04 15.60 .15 .15 -.00 .01 .01 .05 -.06 .02 .03 .34 .06 .04 .04 .34

N=6849 (firm-years); Correlation of |.03| and above is significant at p<.01

^These variables were coded at the protest-event level; all others were at the firm-year level

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Table 3. Probit Models Predicting Likelihood of Protest Against Fortune 500 Corporations Variables Model 1 Model 2 Model 3 History of protest against company 0.001+ 0.001+ 0.001+ (0.001) (0.001) (0.001) History of protest against industry -0.006 -0.006 -0.005 (0.006) (0.006) (0.006) Return on Assets# 0.222 0.283 0.038 (0.742) (0.754) (0.726) Net Sales# 0.096** 0.097** 0.105** (0.011) (0.011) (0.012) Firm prestige# 0.007 0.021 0.069 (0.182) (0.186) (0.203) Debt-to-Equity Ratio# -0.022 -0.027 -0.013 (0.035) (0.035) (0.034) Ownership Concentration# -0.328* -0.331* -0.304* (0.142) (0.145) (0.146) Unionized workforce# 0.223 0.218 0.283 (0.170) (0.171) (0.179) HQ State Liberalism 0.011+ 0.014* 0.017** (0.006) (0.006) (0.006) CSR Profile# -0.013 -0.008 -0.015 (0.016) (0.016) (0.017) CEO Liberalism 0.002 0.004+ 0.002 (0.002) (0.002) (0.002) Organizational Liberalism -0.007 -0.075** (0.005) (0.009) Organizational Liberalism (squared) 0.001** (0.000) Constant -2.340** -2.391** -1.486* (0.610) (0.604) (0.608) Calendar Year Dummies Y Y Y Industry dummies Y Y Y N 7,436 7,436 7,436

+ p<0.1; * p<0.05; ** p<0.01 # These variables were coded for year t-1

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Table 4. Probit Models Predicting Corporate Concessions to Activist Demands Variables Model 1 Model 2 Model 3 Pro-social claims# -0.020 -0.019 -0.022 (0.020) (0.020) (0.020) CSR Profile# 0.058 0.045 0.047 (0.047) (0.047) (0.048) Inverse Mills Ratio (from 1st stage) 0.490 0.458 0.463 (0.300) (0.313) (0.317) Net Sales# 0.004 0.006 0.007 (0.018) (0.019) (0.019) Return on Assets# 0.752 0.802 0.524 (1.134) (1.161) (1.166) Firm Prestige# -0.042 -0.079 -0.031 (0.274) (0.277) (0.278) Debt-to-Equity Ratio# 0.037 0.057 0.041 (0.068) (0.070) (0.070) Unionized workforce 0.121 0.106 0.118 (0.277) (0.276) (0.278) Ownership Concentration# -0.680* -0.754* -0.760* (0.344) (0.347) (0.355) No. of SMOs involved 0.086 0.097 0.075 (0.194) (0.197) (0.202) Protest size 0.069 0.077 0.080 (0.052) (0.053) (0.053) Media Coverage to Protest -0.031** -0.030** -0.029** (0.011) (0.011) (0.011) Institutionalized Practice -0.026 -0.039 0.040 (0.378) (0.378) (0.376) Secondary Stakeholder Protest -0.024 -0.059 -1.273* (0.194) (0.196) (0.613) Democratic President 0.422* 0.299 0.317 (0.202) (0.212) (0.214) HQ State Liberalism 0.012 0.003 0.008 (0.017) (0.017) (0.017) Information Technology industry 0.347 0.257 0.290 (0.232) (0.237) (0.239) CEO Liberalism 0.004 0.001 0.001 (0.005) (0.005) (0.005) Organizational Liberalism 0.014* -0.002 (0.007) (0.010) Organizational Liberalism* Secondary Stakeholder Protest 0.025* (0.012) Constant -2.329+ -2.335+ -1.841 (1.301) (1.342) (1.381) N 300 300 300 + p<0.1; * p<0.05; ** p<0.01 # These variables were coded for year t-1

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Table 5. Poisson Models Predicting Corporate Deployment of Prosocial Claims Variables Model 1 Model 2 Model 3 Model 4 Prior Prosocial claims 0.062** 0.062** 0.062** 0.058* (0.023) (0.023) (0.024) (0.023) Corporate Concession -0.761* -0.766* -0.766* -0.754* (0.311) (0.310) (0.311) (0.299) CSR Profile# -0.083 -0.081 -0.081 -0.085 (0.061) (0.061) (0.061) (0.062) Inverse Mills Ratio (from 1st stage) -0.581 -0.554 -0.570 -0.744+ (0.388) (0.384) (0.380) (0.418) Net Sales# 0.000 0.002 0.001 -0.013 (0.016) (0.016) (0.016) (0.019) Return on Assets# 0.300 0.459 0.428 1.006 (1.497) (1.525) (1.507) (1.668) Firm prestige# -0.359 -0.377 -0.368 -0.330 (0.394) (0.381) (0.367) (0.367) Debt-to-Equity Ratio# 0.035 0.046 0.041 0.018 (0.091) (0.099) (0.104) (0.104) Unionized workforce 0.948* 0.962* 0.964* 0.964** (0.401) (0.395) (0.400) (0.374) Ownership Concentration# 0.894 0.812 0.833 0.663 (0.553) (0.595) (0.610) (0.574) No. of SMOs Involved 0.059 0.065 0.063 0.110 (0.119) (0.122) (0.121) (0.144) Protest size -0.036 -0.033 -0.032 -0.031 (0.039) (0.039) (0.038) (0.043) Media Coverage to Protest 0.010 0.010 0.010 0.007 (0.008) (0.008) (0.008) (0.008) Institutionalized Practice 0.284 0.272 0.274 0.247 (0.272) (0.284) (0.287) (0.275) Secondary Stakeholder Protest -0.182 -0.186 -0.344 -0.194 (0.157) (0.156) (0.483) (0.153) Democratic President 0.228 0.186 0.190 0.150 (0.244) (0.234) (0.236) (0.245) HQ State Liberalism -0.003 -0.006 -0.006 -0.012 (0.021) (0.021) (0.021) (0.021) Information Technology industry -0.470 -0.485 -0.483 -0.624 (0.506) (0.501) (0.502) (0.506) CEO Liberalism 0.002 0.001 0.001 0.002 (0.005) (0.005) (0.005) (0.006) Organizational Liberalism 0.005 0.003 0.093* (0.009) (0.013) (0.039) Organizational Liberalism*Secondary Stakeholder Protest

0.004 (0.009)

Organizational Liberalism (squared) -0.001* (0.000) Constant 0.729 0.679 0.789 -0.294 (1.321) (1.352) (1.439) (1.328) N 300 300 300 300 + p<0.1; * p<0.05; ** p<0.01 # These variables were coded for year t-1

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Table 6. OLS Models Predicting Changes in Corporate Social Responsibility Profile

Variables Model 1 Model 2 Model 3 Model 4 Model 5 CSR Profile# 0.785** 0.784** 0.785** 0.784** 0.784** (0.007) (0.007) (0.007) (0.007) (0.007) Inverse Mills Ratio -0.002 -0.024 -0.030 -0.026 -0.035 (0.058) (0.058) (0.058) (0.057) (0.055) Net Sales# -0.010+ -0.011* -0.013* -0.010* -0.012* (0.005) (0.005) (0.006) (0.005) (0.005) Return on Assets# 0.581* 0.570* 0.573* 0.573* 0.566* (0.230) (0.231) (0.231) (0.233) (0.231) Firm Prestige# 0.517** 0.516** 0.515** 0.511** 0.514** (0.075) (0.075) (0.075) (0.075) (0.075) Debt-to-Equity Ratio# -0.023+ -0.022 -0.022 -0.022 -0.023+ (0.014) (0.014) (0.014) (0.014) (0.014) Unionized workforce -0.023 -0.027 -0.030 -0.031 -0.036 (0.056) (0.057) (0.057) (0.057) (0.056) Ownership Concentration#

0.083 (0.058)

0.090 (0.058)

0.093 (0.058)

0.091 (0.058)

0.095 (0.058)

HQ State Liberalism 0.012** 0.010** 0.010** 0.010** 0.010** (0.003) (0.004) (0.004) (0.004) (0.004) CEO Liberalism 0.001 0.000 0.000 0.000 0.000 (0.001) (0.001) (0.001) (0.001) (0.001) Protest (all stakeholders) 0.181* 0.174+ 0.593+ (0.091) (0.091) (0.318) Organizational Liberalism

0.002* (0.001)

0.003* (0.001)

0.002* (0.001)

0.003* (0.001)

Protest * Organizational Liberalism

-0.009 (0.005)

Secondary Stakeholder Protest

0.010 (0.107)

-0.087 (0.334)

Primary Stakeholder Protest

0.396* (0.197)

1.837** (0.692)

Primary Stakeholder Protest * Organizational Liberalism

-0.030* (0.012)

Secondary Stakeholder Protest * Organizational Liberalism

0.002 (0.006)

Constant -0.457 -0.395 -0.376 -0.385 -0.356 (0.278) (0.282) (0.284) (0.280) (0.277) Calendar year dummies Y Y Y Y Y Industry dummies Y Y Y Y Y R2 0.67 0.68 0.68 0.68 0.69 N 6,849 6,849 6,849 6,849 6,849

+ p<0.1; * p<0.05; ** p<0.01

# These variables were coded for year t-1

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Table 7. Correlations and Descriptive Statistics for Divestiture Analysis (firm-year level)

Mean S.D. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

(1) Business Unit Divestiture .06 .23

(2) Net Sales (logged) 9.23 1.02 -.02

(3) Underperformance severity .26 .60 .15 -.11

(4) High Performance severity .33 .49 -.03 .07 -.29

(5) Tobin's q 1.79 1.16 -.03 -.10 -.18 .64

(6) Debt-to-Equity Ratio 1.46 2.97 .05 .03 .11 -.13 -.12

(7) Ownership Dispersion .35 .25 .03 .06 .12 -.05 .02 .12

(8) Portfolio Unrelatedness .27 .36 .04 .12 -.02 -.06 -.11 -.02 .01

(9) Portfolio Relatedness .19 .30 -.03 .07 .00 -.10 -.11 -.02 .03 .01

(10) CEO Liberalism 39.39 26.97 -.04 .04 .02 -.01 .02 .05 .01 -.00 -.03

(11) Organizational Liberalism 43.84 14.96 -.03 .05 -.01 .05 .10 .01 -.01 -.03 -.01 .36

N=5,512 firm-years; Correlation of .04 and above is significant at p<.05

Table 8. Correlations and Descriptive Statistics for Divestiture Analysis (Completed Divestiture Deals)

Mean S.D. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

(1) Sold to Private Equity .35 .48

(2) Sold to Industry outsider .19 .39 -.35

(3) Post Divestiture Performance .05 .41 .06 .04

(4) Inverse Mills Ratio 2.19 .85 .11 -.32 -.10

(5) Net Sales (logged) 9.14 .89 .03 .03 -.18 .04

(6) Return on Assets -.39 1.35 .14 -.46 -.04 .25 .13

(7) Debt-to-Equity Ratio 2.22 4.15 -.04 .06 .08 -.03 .10 -.07

(8) Portfolio Unrelatedness .32 .39 .03 -.13 .15 -.11 .00 .12 -.02

(9) Portfolio Relatedness .15 .27 -.08 -.08 .08 .08 .14 .08 .03 .03

(10) Ownership Dispersion .37 .26 -.19 .17 .06 -.18 .06 -.11 .15 -.04 .08

(11) CEO Liberalism 35.09 27.49 -.04 .10 -.02 -.04 .12 .00 .08 -.02 -.01 .05

(12) Organizational Liberalism 41.61 14.04 .10 .03 .26 -.10 -.11 .15 -.03 .18 .01 -.04 .19

N=263 divestiture deals; Correlation of .12 and above is significant at p<.05

!

!116!

Table 9. Probit Models Predicting Likelihood of Business Unit Divestitures Variables Model 1 Model 2 Model 3 Model 4 Model 5 Net Sales (logged) -0.050 -0.046 -0.044 -0.050 -0.049 (0.056) (0.056) (0.056) (0.056) (0.056) Underperformance severity 0.269** 0.551** 0.522* 0.845** 0.755** (0.053) (0.158) (0.247) (0.195) (0.291) High Performance severity 0.081 0.070 0.070 0.070 0.070 (0.114) (0.114) (0.114) (0.114) (0.114) Tobin's q -0.059 -0.055 -0.054 -0.050 -0.049 (0.056) (0.056) (0.055) (0.054) (0.054) Debt-to-Equity Ratio 0.029* 0.030* 0.030** 0.028* 0.029* (0.012) (0.012) (0.011) (0.012) (0.012) Ownership Dispersion 0.219 0.220 0.390 0.222 0.300 (0.207) (0.207) (0.661) (0.209) (0.691) Portfolio Unrelatedness 0.296* 0.302* 0.306* 0.297* 0.299* (0.143) (0.142) (0.142) (0.143) (0.143) Portfolio Relatedness -0.100 -0.103 -0.104 0.359 0.356 (0.193) (0.195) (0.195) (0.592) (0.594) CEO Liberalism -0.002 -0.003 -0.003 -0.003 -0.003 (0.002) (0.002) (0.002) (0.002) (0.002) Organizational Liberalism -0.002 0.001 0.002 0.003 0.004 (0.004) (0.004) (0.006) (0.005) (0.006) Underperformance severity × Organizational Liberalism

-0.007* (0.003)

-0.006 (0.005)

-0.014** (0.004)

-0.011+ (0.006)

Ownership Dispersion × Underperformance severity

0.057 (0.387)

0.214 (0.413)

Ownership Dispersion × Organizational Liberalism

-0.004 (0.013)

-0.002 (0.014)

Underperformance severity × Ownership Dispersion × Organizational Liberalism

-0.002 (0.009)

-0.006 (0.009)

Portfolio Relatedness × Underperformance severity

-1.557** (0.589)

-1.565** (0.561)

Portfolio Relatedness × Organizational Liberalism

-0.011 (0.012)

-0.011 (0.012)

Underperformance severity × Portfolio Relatedness × Organizational Liberalism

0.037** (0.013)

0.038** (0.012)

Constant -1.521** -1.657** -1.742** -1.708** -1.756** (0.517) (0.532) (0.609) (0.526) (0.605) N 5,512 5,512 5,512 5,512 5,512

!

!117!

Table 10. Probit Models Predicting Choice of Types of Buyer for Completed Divestiture Deals Probit Regression Multinomial Logistic

Regression^ Sale to Private Equity Firm Sale to Industry outsiders Sale to

Private Equity Firm

Sale to Industry outsiders

Variables Model 1 Model 2 Model 3 Model 4 Model 5 Inverse Mills Ratio 0.257 0.279 -0.462* -0.503* 0.016 -1.032+ (0.226) (0.227) (0.232) (0.250) (0.309) (0.532) Net Sales (logged) 0.108 0.124 0.076 0.103 0.293 0.492+ (0.168) (0.163) (0.140) (0.130) (0.282) (0.283) Return on Assets 0.155 0.132 -0.405** -0.458** -0.105 -0.699* (0.100) (0.098) (0.143) (0.154) (0.189) (0.343) Debt-to-Equity Ratio 0.009 0.008 -0.005 -0.006 0.003 -0.001 (0.030) (0.030) (0.029) (0.028) (0.047) (0.051) Portfolio Unrelatedness 0.265 0.223 -0.568 -0.681 -0.207 -1.186 (0.405) (0.399) (0.479) (0.457) (0.662) (0.975) Portfolio Relatedness -0.004 -0.030 -0.372 -0.483 -1.029 -1.161 (0.573) (0.573) (0.559) (0.568) (0.928) (0.985) Ownership Dispersion -1.005+ -0.937 0.842 0.921 -1.511 0.256 (0.569) (0.592) (0.688) (0.693) (1.073) (1.393) CEO Liberalism -0.004 -0.005 0.008 0.007 -0.003 0.007 (0.005) (0.005) (0.006) (0.006) (0.009) (0.012) Organizational Liberalism 0.009 0.023* 0.024 0.037* (0.011) (0.010) (0.020) (0.018) Constant -2.070 -2.619 -1.907 -3.153+ -3.157 -5.228+ (1.628) (1.635) (1.613) (1.728) (2.817) (2.889) Industry dummies Y Y Y Y N N N 300 300 300 300 300 300

+ p<0.1; * p<0.05; ** p<0.01;!; ^ all!other!firms were!specified!as!the!base!category

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Table 11. OLS Models Predicting Post-Divestiture Performance – Change in Tobin's q

Variables Model 1 Model 2 Inverse Mills Ratio -0.066 -0.049 (0.046) (0.057) Debt-to-Equity Ratio 0.009 0.008 (0.009) (0.008) Net Sales (logged) -0.090** -0.071** (0.034) (0.027) Return on Assets 0.007 -0.007 (0.018) (0.018) Portfolio Unrelatedness 0.152+ 0.119+ (0.082) (0.067) Portfolio Relatedness 0.242* 0.212* (0.120) (0.098) Ownership Dispersion 0.030 0.072 (0.152) (0.136) CEO Liberalism -0.000 -0.001 (0.001) (0.001) Organizational Liberalism 0.007** (0.002) Constant 0.830* 0.370 (0.325) (0.287) R2 0.10 0.14 Industry Dummies Y Y N 263 263

+ p<0.1; * p<0.05; ** p<0.01

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APPENDIX B: FIGURES

Figure 1. Number of Activist Protests Experienced by Firms that were protested at least once

Figure 2. Number of Protests Per Year

010

2030

40Fr

eque

ncy

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Number of Protests Per Firm

010

2030

40Fr

eque

ncy

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Number of Protests Per Year

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Figure 3. Organizational Liberalism Index

Figure 4. CEO Liberalism Index

02

46

8Pe

rcen

t

0 10 20 30 40 50 60 70 80 90 100Organizational Liberalism Index

05

1015

20Pe

rcen

t

0 20 40 60 80 100CEO Liberalism Index

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Figure 5. The Effect of Organizational Liberalism on Firms’ likelihood of being targeted by activists

0.0

5.1

.15

Pred

icted

Pro

babi

lity o

f Pro

test

20 25 30 35 40 45 50 55 60 65 70 75 80Organizational Liberalism

Predictive Margins with 95% CIs

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!122!

Figure 6. The Effect of Organizational Liberalism on Firms’ Deployment of Prosocial Claims

-20

24

6Pr

edict

ed N

umbe

r Of E

vent

s

20 25 30 35 40 45 50 55 60 65 70 75 80Organizational Liberalism

Predictive Margins with 95% CIs

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!123!

Figure 7. The Moderating Effect of Secondary Stakeholder Protest on the association between Organizational Liberalism and Corporate Concessions

Conservative Company

Conservative Company

Liberal Company

Liberal Company

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Primary Secondary

Probability*of*Concession*

Stakeholder*type*

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Figure 8. The Effect of Primary and Secondary Stakeholder Protest on Liberal and Conservative Firms’ CSR based responses to activism

*Please note that even though the ideological differences in the CSR-based responses to primary vs. secondary stakeholder were tested using two spline variables, the results are depicted here in the same graph for the sake of illustration.

Conservative Company

Conservative Company

Liberal Company

Liberal Company

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

Primary Secondary

CSR

Stakeholder Type

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Figure 9. Number of Divestitures for Firms that Divested at least once (for entire study period)

Figure 10. Number of Divestitures Per Year during the study window

010

2030

40Fr

eque

ncy

1 2 3 4 5 6 7 8 9 10Number of Divestitures Per Firm

010

2030

40Fr

eque

ncy

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Number of Divestitures Per Year

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Figure 11. Number Of Divestitures Across Industrial Sectors

020

4060

80Fr

eque

ncy

Natural

Resou

rces

High Te

ch

Consu

mer Prod

ucts

Utilities

Financ

ial Serv

ices

Other S

ervice

s

Number of Divestitures across Industrial Sectors

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Figure 12. The Moderating Effect of Organizational Liberalism on the Relationship between Firm Underperformance Severity and Business Unit Divestiture

Conservative Company

Liberal Company

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

Low (0) High (+1 S.D.)

Prob

abili

ty o

f Bus

ines

s Uni

t Div

estit

ure

Underperformance Severity

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Figure 13. The Moderating Effect of Organizational Liberalism on Underperformance–Divestiture relationship

(a) Under conditions of Low Relatedness in Firm’s Portfolio

(b) Under conditions of High Relatedness in Firm’s Portfolio

Conservative Company

Liberal Company

0

0.02

0.04

0.06

0.08

0.1

0.12

Low (0) High (+1 S.D.)

Prob

abili

ty o

f Bus

ines

s Uni

t Div

estit

ure

Underperformance severity

Conservative Company

Liberal Company

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

Low (0) High (+1 S.D.)

Prob

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f Bus

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s Uni

t Div

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Underperformance severity

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APPENDIX C. Examples of Articles Coded as Concessions

August 27, 2013. Wal-Mart Stores Inc. told workers this week that it will begin offering health insurance benefits to the domestic partners of U.S. employees next year. The extension of health benefits marks a major change for the country's largest private employer of 1.3 million U.S. workers, which has been targeted by gay-rights advocacy groups for failing to do so. Rather than go state by state, the Bentonville, Ark., retailer decided to adopt a companywide approach to ensure consistent treatment of its employees, spokesman Randy Hargrove said. December 20, 2011. Verizon has backed down from plans to charge $2 for using some methods of payment.The company made its announcement hours after the FCC said it would investigate the charges and after angry customers took to the web to vent their frustration. In a statement Verizon said it decided to scrap the new charge "in response to customer feedback." "At Verizon, we take great care to listen to our customers," Dan Mead, president and chief executive officer of Verizon Wireless, said in a statement. "Based on their input, we believe the best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time." April 24, 2002. Amid mounting protests, college clothier Abercrombie & Fitch has pulled a line of T-shirts from stores nationwide following complaints that they depicted racist caricatures of Asian-Americans. The $25 T-shirts show cartoonish Asian characters with slanted eyes and conical hats as pitchmen for fabricated companies such as restaurants, dry cleaners and bowling alleys. One portrays a man pulling a rickshaw with the words "Rick Shaw's Hoagies and Grinders. Order by the foot. Good meat. Quick feet." Another shows "Wong Brothers Laundry Service" and carries the logo "Two Wongs Can Make it White." December 18, 2009. A week after Goldman Sachs moved to quell the outcry over its resurgent profits and pay, Morgan Stanley said its top executive would forgo his bonus this year. The move, announced in a memo to employees, was aimed at placating critics of Wall Street, where bonuses have rebounded sharply since the financial crisis while pay and employment elsewhere in the economy remain depressed. Goldman Sachs said last week that its 30 most senior executives would forgo cash bonuses this year. Instead, the 30 executives will be paid in the form of long-term stock. But Morgan Stanley went one better on Friday by announcing that its chief executive, John J. Mack, would receive no year-end bonus at all. April 18, 2000. In the face of mounting protests from retirees, General Electric Co. said it would increase the amount paid to 134,000 company pensioners, the first such increase since November 1996. Eligible retirees include all those who retired on or before June 1, 1997, as well as those who left the company with at least 25 years of service on or before that date and surviving spouses of pensioners. The announcement comes just 10 days before the annual shareholders' meeting in Richmond, Va., where hundreds of GE retirees have planned a protest to ask for cost-of-living increases. December 12, 2012. Over the past three years, economic growth here has been almost nonexistent, the government has cut spending on almost everything, yet Starbucks sold close to $1.9 billion worth of coffee and food, and paid less tax on its income than one of its baristas. The appearance of unfairness has touched a nerve. Amid a growing customer boycott, Starbucks agreed last week to pay $32 million in taxes over the next two years. “While Starbucks has complied with all U.K. tax laws, today we are announcing changes that will result in the company paying higher corporation tax in the U.K. Specifically, Starbucks will not claim tax deductions for royalties and standard intercompany charges,” wrote Kris Engskov, Starbucks’ managing director for Britain, in an open letter on the company Web site.

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APPENDIX D. Examples of Articles coded as Pro-social Claims April 06, 2012. Sam's Club is providing free health screenings at all Sam's Club locations with a pharmacy, Saturday, April 14 from 11 a.m. to 3 p.m. for members and the public. The free brain health screenings include a memory test with educational materials on Alzheimer's and dementia provided by the Alzheimer's Foundation of America, glucose**, body mass index (BMI) and blood pressure tests, typically valued up to $100. During the screenings, Sam's Club pharmacies will also offer free samples of FOCUSFactor supplements by Factor Nutrition Labs. "As baby boomers continue to age, Sam's Club recognizes that we must help our members manage their whole health, including their brains," said Jill Turner-Mitchael, senior vice president, Sam's Club Health and Wellness. "We're offering these screenings around the country to provide continued support of preventative health to our communities and to encourage living a long and healthy life." November 22, 2008. Through its Help the Homeless program, Fannie Mae today also announced a grant of $100,000 to the United Way of the National Capital Area (UWNCA) as part of a rescue fund for families threatened or displaced by foreclosure. The rescue fund will be used to assist families avoid foreclosure where possible and to help owners and renters identify alternative housing when needed May 01, 2008. In California, Mrs. Sylvia Rodriguez’s fifth grade class from Phoebe Hearst Elementary in Sacramento won first place in the project portion of Disney’s Environmentality Challenge. They were awarded an all-expense paid trip to Disneyland and the opportunity to star in a parade down Main Street. “We introduce kids to environmental issues in hopes that they will carry lessons learned into the future. The program succeeds because the kids have fun while learning valuable lessons without skipping a beat in their regular curriculum,” says Dr. Beth Stevens, Senior Vice President, Disney’s Environmental Affairs January 27, 2006. In recognition of American Heart Month, Wal-Mart stores and SAM'S CLUB locations nationwide will host the third annual Healthy Heart Community Event on Saturday, February 18. All visitors will be offered complimentary cholesterol and blood pressure screenings, samples of heart-healthy products, and educational information on heart disease. The event will be held at U.S. Wal-Mart stores on February 18 from 11 a.m. to 5 p.m., with free health screenings available from 11 a.m. to 3 p.m. SAM'S CLUB locations will also participate during the same times, offering the event to members and nonmembers. A national health screening company will be on hand to provide cholesterol and blood pressure screenings. No appointment is necessary. February 23, 2006. Ronald McDonald House Charities (RMHC(R)) and the McDonald's Owner/Operators of the Greater Philadelphia Region will recognize the accomplishments of 20 area high school seniors by awarding them RMHC/African American Future Achievers $1,000 college scholarships. RMHC/African American Future Achievers is a local extension of a national program that recognizes African American high school seniors for their scholastic achievement, community service and financial need. June 11, 2012. Morgan, who is striving to succeed in a one-of-a kind handmade jewelry business, currently attends entrepreneurship classes with fifteen other survivors. They are increasing their knowledge in small business ownership at Everywoman Opportunity Center, Inc., a local nonprofit that helps women achieve economic and personal self-sufficiency. This has been made possible through a grant from Verizon, one of five $100,000 grants awarded to five workforce development organizations statewide. The program is called Project Fresh Start. Everywoman is working in tandem with SCORE, the Small Business Development Center, and the Family Justice Center of Erie County, tailoring the program to meet the needs of domestic violence survivors. Successful graduates of the program will develop a business plan for their new venture and be eligible to apply for a Verizon Domestic Violence Entrepreneurship Grant of up to $5,000. These grants, provided by Verizon Wireless' HopeLine Program, help women like Morgan turn their business ideas into reality.

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APPENDIX E. Frequency of Different Types of Stakeholders Stakeholder Types Description Frequency

Primary Stakeholders

1. Employees 102

2. Customers/small businesses/users 12

3. Shareholders 13

Secondary Stakeholders

4. Social movement group/advocacy group/activists 47

5. Other/General public/residents of certain area 112

6. Students 14

CURRICULUM VITAE

ABHINAV GUPTA

ACADEMIC APPOINTMENT Assistant Professor of Strategic Management (Beginning July, 2015) Foster School of Business, The University of Washington, Seattle EDUCATION Ph.D. in Management & Organization (2015) Smeal College of Business, The Pennsylvania State University Post Graduate Diploma in Management (2010) International Management Institute, New Delhi Bachelor of Commerce (Honors) (2008) Aligarh University, India RESEARCH INTERESTS Political ideology of corporations and elites, inter-organizational diffusion, social activism

PUBLISHED RESEARCH

Briscoe, F., Gupta, A., and Anner, M. (2015) Social Activism and Practice Diffusion: How Activist Tactics Affect Non-targeted Organizations. Administrative Science Quarterly Hambrick, D. C., Humphrey, S. and Gupta, A. (2015) Structural Interdependence within Top Management Teams: A key moderator of Upper Echelon Predictions. Strategic Management Journal