Within-firm Labor Heterogeneity and Firm Performance: Evidence from Employee Political Ideology Conflicts

54 Pages Posted: 7 Dec 2020 Last revised: 21 Dec 2020

See all articles by Xiao Ren

Xiao Ren

The Chinese University of Hong Kong, Shenzhen; Shenzhen Finance Institute

Date Written: December 1, 2020

Abstract

This paper explores the implication of within-firm labor heterogeneity for firm performance through the lens of employee political ideology. Using individual campaign donation information to capture political ideology, I find that political ideology conflicts, both those within employees and those between CEOs and employees, are negatively associated with firms’ future operating performance. This effect is stronger for firms whose employees are more geographically concentrated and more sophisticated. The reduced labor productivity and abnormal employee turnover are two plausible mechanisms through which employee political ideology conflicts hurt firm performance. To establish causality, I use an instrumental variable approach which relies on the exogenous variation in political ideology caused by local television station ownership changes.

Keywords: labor and finance, political ideology, worker-management conflict, campaign contribution, within-firm labor heterogeneity

JEL Classification: G30, J24, J28, J53, M14, P48

Suggested Citation

Ren, Xiao, Within-firm Labor Heterogeneity and Firm Performance: Evidence from Employee Political Ideology Conflicts (December 1, 2020). Available at SSRN: https://ssrn.com/abstract=3741089 or http://dx.doi.org/10.2139/ssrn.3741089

Xiao Ren (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

Shenzhen Finance Institute ( email )

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