“…2 We posit that uncertainty regarding the impact of future policies on firms rises with the difficulty in assessing the set of preferred policies and with the likelihood that new policies can be targeted toward industries and geographic areas where firms operate. Furthermore, since both the range of possible future policies (Fowler, 2006;Füss and Bechtel, 2008) and the capacity of sponsoring, drafting, and passing new legislation (Anderson, Box-Steffensmeier, and Sinclair-Chapman, 2003;Krutz, 2005) are functions of partisanship, policy risk at the state level will vary with the degree of the state's political alignment with the President's party. 3 Fowler (2006) shows that divided government mitigates policy risk by reducing the uncertainty associated with large policy changes because divided government forces the parties to negotiate and limits the range of policy changes that would be possible under unified government when one party has full control.…”