How Political Ideology Influences Where Companies Choose to Set Up Shop: Novel Applications of Glassdoor Data to Assess Political Alignment Within Firms

This guest blog post was written by Benjamin Barber IV and Daniel Blake, Associate Professors at IE University in Madrid, Spain. This blog is part of a series highlighting academic research using Glassdoor data. It is based on research that was originally published in the Strategic Management Journal in December 2023. 

Americans are increasingly divided by their political views. People with different political ideologies (liberal/conservative) prefer different television shows, like different foods, shop differently, attend different religious services, and consume different news. With growing polarization, people with different political affiliations also increasingly stand in opposition to one another. They like and trust those that share their political identity, while disliking and distrusting those that do not (see, example, here). Americans are now more likely to form friendships with people that share their political leanings as political ideologies have come to shape not just how people vote, but also how they engage with one another. 

Corporate Location Strategies in an Ideologically Divided World 

In our article, “My Kind of People: Political Polarization, Ideology and Firm Location,” published in the Strategic Management Journal, we investigate how these societal dynamics affect business operations and influence decisions regarding the location of new establishments. Although many hold the view that one should not bring politics to work, academic research has shown that political polarization has seeped into work settings. Individuals prefer to collaborate and engage with those that share their political identities, while avoiding or being uncivil towards those that do not (see, for example, here, here and here). They also tend to overvalue the knowledge and capabilities of those that share their political identities. Thus, a Democrat will more readily take advice from a fellow liberal than a conservative, even if the conservative is more capable. 

Our article argues that such dynamics affect how firms evaluate where to locate new operations. Companies benefit in numerous ways when their employees willingly collaborate and exchange knowledge and information with each other. If political differences inhibit productive employee engagement, firms have a clear incentive to promote ideological alignment across their operations by avoiding the establishment of new facilities in areas that are “ideologically distant” to their existing operations. So, for example, if a company is located in mainly liberal areas, its workforce is more likely to be liberal as well, and to maintain productive relationships across its organization, the company will avoid locating new operations in conservative areas of the country. 

Our analysis of the location of 220,000 new establishments created between 2009 and 2014 finds that ideological distance has a strong, negative effect on where firms choose to locate their new establishments. What is more, companies are more keen to avoid ideologically distant locations when societal polarization is greater. This indicates political differences are more salient to where firms choose to locate when there are higher levels of animosity between conservatives and liberals. 

How Ideological Distance Affects Glassdoor Reviews 

An important part of our analysis involved the use of employee review data provided by Glassdoor. We were able to rely on the Glassdoor data to investigate the effects of ideological distance at the individual employee level and see if employees’ lived experience was consistent with our findings regarding firm location. While each Glassdoor review is anonymous, it does allow reviewers to indicate their general location. From this, we can infer reviewers’ likely ideological leanings. For example, if an employee is located in a county that voted heavily for the Democratic candidate in the previous presidential election, probabilistically they are more likely to be liberals themselves. Thus, we use employee location to generate an approximate measure of the alignment of the ideology of the employee writing the review and the company they are reviewing. 

Our statistical analysis of Glassdoor reviews reveals that employees evaluate their organization negatively when ideological alignment is low. In particular, they are more likely to give their company a negative rating on culture/values and are more likely to not recommend working at the organization. We find this is true even when we control for their assessments of other aspects of working at the company such as work/life balance and satisfaction with compensation. We also find that ideologically distant employees are more likely to list collaboration, alienation and isolation as a con of working for their company. This confirms our assertion that individuals that identify with different ideological or political groups struggle to form strong and productive connections at work. 

What makes our analysis particularly informative is that we hold constant firm characteristics in our statistical models using firm fixed effects. Thus, what we are finding is that within the same company, employees’ experiences of their work life differ depending on whether or not they are likely to be ideologically aligned with the rest of their company. Being an ideological outlier is associated with less connection and engagement with managers and employees in other parts of the organization. And the Glassdoor data reveal that this has a negative impact on individuals’ satisfaction at work. 

One might also expect that poor engagement and collaboration has negative implications for company performance. This is exactly what we find in our research as companies are more likely to shut down facilities in areas that are ideologically distant from the rest of their operations. 

Implications for the Workforce 

The implications of our research for employees and job-hunters are not entirely straightforward. We do find that being part of an organization that is ideologically distant to oneself is associated with negative assessments of the company. Employees could find workplaces becoming more ideologically homogeneous, potentially fostering a more harmonious environment with fewer conflicts based on political identities. 

However, it also raises concerns about the diversity of thought within these workplaces. When ideological diversity is limited, there is a risk of stifling creativity, critical thinking and sound judgment, as alternative viewpoints might be underrepresented. Such a trend might lead to geographical and cultural ‘echo chambers,’ where diverse opinions and perspectives are scarce. 

Further, the potential societal implications of this trend are wide-reaching. The American workplace has traditionally been an important venue for political discussion between individuals holding different viewpoints. As businesses increasingly gravitate towards ideologically proximate areas, this could hinder the development of a more inclusive and understanding society, as interactions across different ideological groups become less frequent. The role of business in either contributing to or mitigating societal polarization could be significant, underscoring the need for a balanced approach in corporate location strategies that consider both business needs and societal harmony. 

Either way, one thing is for certain: as Americans hold on more tightly to their political and ideological identities, we expect that politics will continue to be present in the American workplace for the foreseeable future.