The Elephant-Donkey Divide: Ideology Based Faultlines and Strategic Renewal in Turnaround Situations

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Research on political psychology implies that ideological differences among individuals become salient in situations characterized by uncertainty and threat. In this study, we integrate faultlines theory with the uncertainty-threat principle from political psychology to introduce the notion of ideology-based top management team (TMT) faultlines – and examine its effects on strategic renewal in an uncertainty-threat context (i.e., in turnaround situations). We argue that, in turnaround situations, differences in political ideology can fracture the TMT into ideological factions (i.e., conservatives vs. liberals) with divergent attitudes toward the adequate management of ‘uncertainty and threat’. Such divergent attitudes can cause decision-making fragmentation in the executive group and reduce the TMT’s ability to swiftly enact renewal response. Further, our research also considers the contingency impact of external environmental factors (i.e., high shareholder unrest and industry performance decline) that may heighten uncertainty and threat for executives in turnaround firms, and further hamper strategic renewal response. Building upon our findings, we offer a midrange theory of ideological separation in organizational upper echelons and highlight its effects in situations requiring swift and adaptive action.