Decision-Making in Polarized Boards: The Impact of Board Ideological Diversity on M&A Performance

Academy of Management Proceedings, vol. 2025

Abstract

In light of heightened political polarization, many organizations and their boards of directors gravitate toward ideological alignment to minimize internal conflict and mistrust. However, board cognition theory posits that directors’ ideological heterogeneity can enrich collective decision-making. As political ideology is strongly linked to an individual’s cognitive processes and behavioral patterns, and boards increasingly shape critical strategic investments, particularly mergers and acquisitions (M&A), we examine whether board ideological diversity enhances M&A performance and the conditions that shape this relationship. Drawing on data from Standard & Poor’s (S&P) 500 firms between 2003 and 2023, our findings confirm that board ideological diversity is positively associated with M&A performance. Furthermore, this effect is notably stronger in smaller boards, where coordination and debate are both more engaged and efficient. Conversely, the benefits of ideological diversity diminish in highly dynamic environments, suggesting that heightened external volatility constrains the thorough deliberation and synergy identification typically enabled by diverse perspectives. These results have important implications for director selection processes, indicating that current trends favoring ideological alignment may limit the potential benefits of diverse viewpoints in strategic M&A decisions.

Authors 2

1. Maximilien Barrault Aachen

   RWTH Aachen University

   Affiliation as printed

   RWTH Aachen University

2. Andrea Greven
   Affiliation as printed