This research examines the influence of chief executive officers’ (CEOs’) political ideologies—specifically, their degree of political liberalism (i.e., support for the Democratic Party relative to the Republican Party)—on firms’ innovation propensity (i.e., rate of new product introductions [NPIs]). The authors propose that CEOs’ degree of political liberalism positively affects their firms’ rate of NPIs. This impact is weakened, however, when CEOs have low power, when a high proportion of their compensation comes from equity, when the marketing department has high influence in the top management team, and when the economy is growing. Liberal CEOs’ greater rate of NPIs is associated with superior Tobin's q but also higher stock return volatility. Findings based on observations of 421 publicly listed U.S. firms from 2006 to 2010 provide considerable support for the authors’ hypotheses. The authors also examine changes in firms’ rate of NPIs and performance around CEO turnovers and find corroborating evidence for their thesis. These results highlight the role of executives’ personal values in shaping firms’ innovation strategy as well as the risks and rewards associated with aggressive NPIs.
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