This paper examines the impact of CEO political orientation on digital innovation. Drawing on upper echelons theory, this study argues that a CEO’s political orientation influences a company's strategic decisions. Following stakeholder theory, CEOs with a balanced political orientation can better coordinate stakeholders' interests, resulting in greater stakeholder acceptance and support of innovation. We examine a dataset of publicly traded US companies from 2011 to 2019. The results show that the relationship between CEO political orientation and digital innovation has the shape of an inverted U. Moreover, we reveal managerial and environmental contingencies by highlighting the moderating role of managerial discretion. We contribute by adding a new level of analysis to the existing innovation literature on the antecedents of digital innovation, i.e., a CEO’s values reflected in their political orientation. Moreover, by investigating non-linearities, we establish a more nuanced relationship. We further contribute to prior research by introducing the moderating role of managerial discretion and emphasizing that the external environment and managerial characteristics are important sources of managerial discretion. The results have implications for managers as they encourage them to consider political orientation when hiring a CEO since it impacts digital innovation.
