To understand polarization’s impact, we need to ditch the notion that increased political conflict is rooted in ideology and ideas

Political polarization is rising everywhere. In the U.S., it’s approaching levels not seen since the Civil War. No matter how much that firms might want to ignore politics, it so pervades American life that engagement is unavoidable. Recent examples include pressures Disney faced regarding Jimmy Kimmel, or sharply waning customer satisfaction with Tesla after Elon Musk’s foray into campaigns and government.

In a series of papers, my colleagues and I have shown that to understand polarization’s impact on firms, we need to ditch the notion that increased political conflict is rooted in ideology and ideas. Instead, we need to acknowledge that it stems from the emotion and identity embodied in partisanship.

In our first examination of this big idea, we found that the way top managers communicate about risk varies with the partisan nature of the risk, and with a firm’s previous political positioning. Specifically, when the COVID-19 pandemic struck, Democratic-positioned firms were more likely to acknowledge that a) the pandemic indeed posed a risk and b) they were taking concrete steps as an organization to mitigate it.

Moving from top managers to employees, in an experiment we tested whether employees’ partisanship affects their decisions to apply for a new job and pursue promotion in a current job. Perhaps unsurprisingly given the increasingly polarized political atmosphere, we found that employees seek workplaces where the social environments align with their own partisanship. There were important exceptions, however. Employees were unwilling to take large pay cuts to achieve partisan fit with those at their workplace. Remote employees did not care about this type of political alignment with colleagues. This second trade-off suggests an underappreciated benefit of remote work: It can prevent political polarization from more seriously harming recruitment and retention.

Lastly, partisanship affects investors’ behavior in financial markets. Financial activists are substantially less likely to target firms whose shareholder bases include Democratic members of Congress. This deterrence appears to be driven by the potential for a “name-and-shame” campaign that might damage the activist’s reputation and their access to resources.

Businesses ignore the implications of this growing political polarization at their peril. Firm leaders need to understand and strategize around how it is affecting both their internal and external stakeholders, given the political stances of those groups. They need clarity about the consequences of engaging in political stances or adopting implicitly political strategies.

Benton, R. A., Cobb, J. A., and Werner, T. (2022). “Firm Partisan Positioning, Polarization, and Risk Communication: Examining Voluntary Disclosures on COVID-19.” Strategic Management Journal, 43(4), 697-723. https://doi.org/10.1002/smj.3352

DesJardine, M.R., Shi, W., and Werner, T. (2025). “Shareholder Activism and the Deterrence Effect of Democratic Politician Shareholders.” Organization Science, 36(2), 993-1019. https://doi.org/10.1287/orsc.2023.17495

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