How do a state’s lesbian, gay, bisexual, and transgendered (LGBT) supportive policies affect a firm’s likelihood of entry? Which contextual factors shape this tendency? Drawing on the literature on institutional theory, LGBTs, and diversity, we postulate that a state’s LGBT supportive policies can influence firms’ likelihood of entry. A state’s LGBT supportive policies will make the state more inclusive and accommodating. This can foster more positive work behaviors, thus enhancing a focal firms’ productivity. Also, with the introduction of LGBT supportive policies, citizens in a state will be more open-minded while better appreciating individuals of different orientations. We consequently contend that firms are likely to enter a state with LGBT supportive policies than another state without. In addition, we postulate that the effect of state LGBT supportive policies can be moderated by contingencies including, (1) a focal firm’s support for LGBTs, (2) LGBT friendly suppliers’ actions in a state, and (3) LGBT friendly customers’ actions in a state. Results based on a sample of U.S. public firms support our arguments. Our findings contribute to the literature on LGBTs and firm market entry.
