Evenhandedness in resource allocation: ItS relationship with CEO ideology, organizational discretion, and firm performance

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9 Citations (Scopus)

Abstract

We develop a new explanation for why some organizations are relatively evenhanded, while others are more disparate, in allocating resources to subunits. Recognizing the central role of chief executive officers (CEOs) in resource allocation, we argue that CEOs’ personal values regarding egalitarianism, as manifested in their political ideologies, will lead to different allocation styles. Liberal CEOs will favor evenhandedness, while conservatives will tolerate greater disparities. Placing this primary expectation in a social context, we then argue that the effects of a CEO’s values are amplified when aligned with the prevailing ideology among organizational members, and conversely are muted when misaligned. Then, examining how instrumental incentives moderate the enactment of CEO values, we envision motivated cognition as a potent psychological process, which leads CEOs to “double down” on their personal values when they have more to gain or lose (when pay is more equity-based or the CEO has larger shareholdings). Finally, we consider the implications of our values-based framework for firm performance, arguing that evenhanded allocations are beneficial when organizational ideology is liberal, but harmful when the organization leans conservative. We test our ideas on a sample of multibusiness firms, using personal political donations to capture ideologies. We find considerable support for our hypotheses.

Original languageEnglish (US)
Pages (from-to)1848-1868
Number of pages21
JournalAcademy of Management Journal
Volume61
Issue number5
DOIs
StatePublished - Oct 1 2018

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Resource allocation
Firm performance
Chief executive officer
Discretion
Ideology

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

Cite this

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abstract = "We develop a new explanation for why some organizations are relatively evenhanded, while others are more disparate, in allocating resources to subunits. Recognizing the central role of chief executive officers (CEOs) in resource allocation, we argue that CEOs’ personal values regarding egalitarianism, as manifested in their political ideologies, will lead to different allocation styles. Liberal CEOs will favor evenhandedness, while conservatives will tolerate greater disparities. Placing this primary expectation in a social context, we then argue that the effects of a CEO’s values are amplified when aligned with the prevailing ideology among organizational members, and conversely are muted when misaligned. Then, examining how instrumental incentives moderate the enactment of CEO values, we envision motivated cognition as a potent psychological process, which leads CEOs to “double down” on their personal values when they have more to gain or lose (when pay is more equity-based or the CEO has larger shareholdings). Finally, we consider the implications of our values-based framework for firm performance, arguing that evenhanded allocations are beneficial when organizational ideology is liberal, but harmful when the organization leans conservative. We test our ideas on a sample of multibusiness firms, using personal political donations to capture ideologies. We find considerable support for our hypotheses.",
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