This paper empirically examines how consumers react when a company marks a product with a gay label. The company under scrutiny is one of the largest video game developers in the world, and the labeled product is a popular video game character. We use a regression discontinuity design to exploit the quasi-experimental setting. The main finding was significant drop in demand for this character and a return to previous levels after approximately 3 months. Possible mechanisms and dynamics were explored by (...) analyzing demand for other characters and by surveying consumers. The results are consistent after performing robustness checks based on grid search, subsampling, and placebo tests. (shrink)

A growing body of business ethics research has shown that firms are beginning to embrace the lesbian, gay, bisexual, and transgender (LGBT) community with internal organizational policies and temporary activism activities. Despite these positive developments, little research has examined firms’ LGBT inclusion strategy at the product level and whether adding LGBT representation to products helps, hurts, or has no impact on corporate products’ market performance. Prior studies have examined LGBT-themed and LGBT-vague representations and identified limitations of both. The current research (...) presents an alternative LGBT-inclusive representation in which heterosexual and LGBT imagery are both presented, with the former receiving more exposure than the latter. A secondary analysis of 4216 movies and a controlled experiment reveal converging evidence: movies with LGBT-inclusive representation outperform those with no LGBT representation or with LGBT-themed representation. The superiority of LGBT-inclusive representation comes from its ability to appeal to consumer segments holding favorable and unfavorable LGBT attitudes. While cultural and entertainment products often play profound roles in changing society’s ethical standards and moral attitudes, they are rarely studied in the business ethics literature. Our findings fill this gap while answering a multimillion-dollar question for the entertainment industry. (shrink)

The recent wave of same-sex marriage legalization marks the most significant human rights progress in decades. Nevertheless, the valuation effects on corporate America are unclear. While the arguments supporting marriage equality are largely in the domain of law and sociology, many prominent business leaders are actively engaged in campaigns advocating marriage equality. This suggests that the LGBT civil rights movement of our generation might have valuation implications for corporate America beyond human rights equality. This paper investigates the market perception of (...) state-level same-sex marriage legalization by examining the short-window market reactions to firms headquartered in a state. We find positive market reactions to firms headquartered in states that legally recognize marriage equality. Further, we find that the market views companies more favorably in: first-mover states before the Supreme Court ruling of United States v. Windsor, and states that have stronger anti-discrimination laws for the LGBT community. Our findings complement prior research that focuses on the economic consequences of firm-level LGBT human rights policies by examining the state/nation-level legal impact, adding a new dimension to ethical practices that can have economic consequences. (shrink)