The differential effects of CEO narcissism and hubris on corporate social responsibility

Research Summary: While prior studies have predominantly shown that CEO narcissism and hubris exhibit similar effects on various strategic decisions and outcomes, this study aims to explore the mechanisms underlying how narcissistic versus hubristic CEOs affect their firms differently. Specifically, we investigate how peer influence moderates the CEO narcissism/hubris—corporate social responsibility (CSR). With a sample of S&P 1500 firms for 2003–2010, we find that the positive relationship between CEO narcissism and CSR is strengthened (weakened) when board‐interlocked peer firms invest less (more) intensively in CSR than a CEO's own firm; the negative relationship between CEO hubris and CSR is strengthened when peer firms are engaged in less CSR than a CEO's own firm. Managerial Summary: Some CEOs are more narcissistic while others may be more hubristic, but these two groups of CEOs hold different attitudes toward the extent to which their firms should engage in corporate social responsibility (CSR). Our findings with a large sample of U.S. publically listed firms suggest that narcissistic CEOs care more about CSR, but hubristic CEOs care less. Interestingly, when narcissistic CEOs observe their peer firms engaging in more or less CSR than their own firms, they tend to respond in an opposite manner; in contrast, hubristic CEOs will only engage in even less CSR when their peers also do not emphasize CSR. Our findings point to a fundamental difference between CEO narcissism and hubris in terms of how they affect firms' CSR decisions based on their social comparison with peer firms.     

Above the glass ceiling: When are women and racial/ethnic minorities promoted to CEO?

Using a dataset of all CEO transitions in Fortune 500 companies over a 15‐year period, we analyze mechanisms that shape the promotion probabilities and leadership tenure of women and racial/ethnic minority CEOs. Consistent with the theory of the glass cliff, we find that occupational minorities—defined as white women and men and women of color—are more likely than white men to be promoted CEO of weakly performing firms. Though we find no significant differences in tenure length between occupational minorities and white men, we find that when firm performance declines during the tenure of occupational minority CEOs, these leaders are likely to be replaced by white men. We term this phenomenon the “savior effect.” © 2013 John Wiley & Sons, Ltd.     

Earthquake or glacier? How CEO charisma manifests in firm strategy over time

Numerous studies have focused on CEO charisma as an antecedent to firm performance, but this literature has largely overlooked the possibility that charisma manifests in more proximal strategic initiatives that (unlike performance) are largely under the CEO's control. In this study, we integrate perspectives from the upper echelons and charismatic leadership literatures to argue that CEO charisma influences year‐over‐year strategic change, the degree to which strategies deviate from industry central tendencies, and the degree of emphasis on corporate social responsibility. We also theorize that, depending on the outcome in question, the effects of charisma can become both amplified and diminished as CEO tenure advances. Employing a novel data collection approach for a sample of 113 S&P 500 CEOs, we find broad support for our theory. Copyright © 2014 John Wiley & Sons, Ltd.     

Corporate social responsibility or CEO narcissism? CSR motivations and organizational performance

This study builds on insights from both upper echelons and agency perspectives to examine the effects on corporate social responsibility (CSR) practices of CEO's narcissism. Drawing on prior theory about CEO narcissism, we argue that CSR can be a response to leaders' personal needs for attention and image reinforcement and hypothesize that CEO narcissism has positive effects on levels and profile of organizational CSR; additionally, CEO narcissism will reduce the effect of CSR on performance. We find support for our ideas with a sample of Fortune 500 CEOs, operationalizing CEO narcissism with a novel media‐based measurement technique that uses third‐party ratings of CEO characteristics with validated psychometric scales. Copyright © 2014 John Wiley & Sons, Ltd.     

Red,blue, and purple firms: Organizational political ideology and corporate social responsibility

Research summary : Why do firms vary so much in their stances toward corporate social responsibility (CSR )? Prior research has emphasized the role of external pressures, as well as CEO preferences, while little attention has been paid to the possibility that CSR may also stem from prevailing beliefs among the body politic of the firm. We introduce the concept of organizational political ideology to explain how political beliefs of organizational members shape corporate advances in CSR . Using a novel measure based on the political contributions by employees of Fortune 500 firms, we find that ideology predicts advances in CSR . This effect appears stronger when CSR is rare in the firm's industry, when firms are high in human capital intensity, and when the CEO has had long organizational tenure . Managerial summary : Why do firms vary in their stances toward corporate social responsibility (CSR )? Prior research suggests that companies engage in CSR when under pressure to do so, or when their CEOs have liberal values. We introduce the concept of organizational political ideology, and argue that CSR may also result from the values of the larger employee population. Introducing a novel measure of organizational political ideology, based on employees' donations to the two major political parties in the United States, we find that liberal‐leaning companies engage in more CSR than conservative‐leaning companies, and even more so when other firms in the industry have weaker CSR records, when the company relies heavily on human resources and when the company's CEO has a long organizational tenure . Copyright © 2016 John Wiley & Sons, Ltd.     

Settling up in CEO compensation: The impact of divestiture intensity and contextual factors in refocusing firms

We examine the relationship between strategic change and CEO compensation by studying how a firm's refocusing program influences CEO compensation after completing the change. We contribute to the ‘settling up’ literature by arguing that strategic change is often uncertain for both the CEO and the board of directors responsible for executive compensation. As such the firm is likely to settle up with the CEO by paying for compensation risk and effort undertaken during refocusing after the extent and impact of strategic change are better known. We find that refocusing intensity is positively related to post‐refocusing CEO total compensation, suggesting that ‘settling up’ through post hoc compensation is an important factor in strategic change. We also find that prior firm performance, governance structure and industry dynamism are important moderators of this relationship. © 2013 John Wiley & Sons, Ltd.     

The strategic value of CEO external directorate networks: implications for CEO compensation

This study examines the relationship between CEO external directorate networks and CEO compensation. Drawing on previous research showing a link between executives' external networks, firm strategy, and performance, the study argues that executive external networks are strategically valuable to firms; thus, they should be reflected in executive compensation. The study further examines whether firm diversification, with its elevated demand for strategic resources, moderates the relationship between CEO external directorate networks and pay. Hypotheses are tested using a sample of 460 Fortune 1000 firms. Analyses reveal that the rewards to CEO external directorate networks are contingent upon the firm's level of diversification. Implications for future research and practice are discussed. Copyright © 2001 John Wiley & Sons, Ltd.     

Strength in numbers or guilt by association? Intragroup effects of female chief executive announcements

We predict that the media reports on female CEOs as a coherent group, whereas male CEOs are treated as individuals by the media. We also suggest that the resulting investors' perceptions of group entitativity of female‐led firms may not only influence the succession event–performance relationship at the focal firm, but may also have a significant effect on the value of other female‐led companies. Results of a text analysis and an event study of appointments of female CEOs to Fortune 1000 firms provide support for these predictions. Copyright © 2013 John Wiley & Sons, Ltd.     

Why do some outside successions fare better than others? The role of outside CEOs' prior experience with board diversity

Research summary: We develop a theory to explain why new outside CEOs can better manage their relationship with the board if they previously served on boards that were more diverse than the focal board. We predict that a new outside CEO's prior experience with more diverse boards not only reduces the likelihood of post‐succession CEO turnover and director turnover, but also improves firm performance. Results from an analysis of 188 outside CEOs in a sample of Fortune 500 companies provide support for our theory. This study contributes to upper echelon theory and research by identifying outside CEOs' prior experience with board diversity as an important aspect of their background that influences a range of major organizational outcomes, including CEO turnover, director turnover, and firm performance. Managerial summary: It is challenging to be a new CEO who comes from outside of the organization. Our study examines why some new outside CEOs fare better than others. We suggest that a positive relationship with the board of directors is a key factor in a new outside CEO's success. A new outside CEO can better manage the relationship with the board if he or she has prior experience working with other demographically diverse boards. In contrast, when the focal board is more diverse than the other boards on which the new CEO previously served, the new CEO tends to struggle in managing his or her relationship with the board, experiencing a higher likelihood of turnover and delivering worse financial performance. Copyright © 2015 John Wiley & Sons, Ltd.     

Nested identities as cognitive drivers of strategy

Research Summary: Organizations face tensions to conform to industry norms for legitimacy yet differentiate for competitive advantage when implementing strategies. We suggest this tension is due to and resolved through organizations’ cognitive negotiations of multiple levels of identity. Through an inductive study in the recreational vehicle industry, we find that organizations concurrently draw on identities at the organizational, industry, and strategic group levels to formulate and enact specific competitive actions. Specifically, we find that organizational identity relates to decisions on product offerings; industry identity relates to downstream strategy; and strategic group identity relates to upstream strategy, firm boundaries, and expansion mode. Our findings highlight the importance of strategic group identity and inform a grounded model describing how organizations draw upon different levels of identity to influence strategy. Managerial Summary: Many managers experience tensions of differentiating their firms’ competitive actions from rivals, while conforming with industry norms and practices. In this article, we argue that a manager can navigate these tensions by understanding their firm, strategic group, and industry identities and how these identities interrelate. Through a qualitative case study of the U.S. recreational vehicle industry, we show that each level of identity influences different competitive actions, with firm identity connected to product offerings, industry identity related to managing downstream distribution, and strategic group identity related to firm boundary and acquisition strategies. Overall, strategic group identity is the most critical for managers as this level filters how they view competitors and provides the rules of competition.     

The harder they fall,the faster they rise: Approach and avoidance focus in narcissistic CEOs

Drawing on theoretical underpinnings of approach‐avoidance motivation and CEO narcissism, we provide a framework examining stronger approach focus (motivation towards desirable outcomes) and weaker avoidance focus (motivation away from undesirable outcomes) in narcissistic CEOs using a quasi‐natural experimental setting—the economic crisis beginning in 2007. Because highly narcissistic CEOs possess lower avoidance motivation in the precrisis period, their firms face greater declines in the onset of the crisis. However, their greater tendency towards approach motivation enables narcissistic CEOs to increase firm performance in the postcrisis period. While narcissistic CEOs are less likely to protect against potential shocks, they are adept at helping firms recover from such shocks. Using a sample of 392 CEOs representing 2,352 CEO firm‐years, we find support for the proposed framework. Copyright © 2013 John Wiley & Sons, Ltd.     

Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals

Research summary : We examine why a firm takes specific competitive action in nonmarket and resource‐market spaces, particularly when it perceives threats from informal and foreign competitor groups, respectively. We address this question by combining insights from competitive rivalry, strategic groups, and nonmarket strategy literatures in an emerging economy context. Specifically, we theorize how threats from informal and foreign rival firms in an emerging market influence a firm's engagement in corruption activities and its investments in HR training, respectively. We also argue that the likelihoods of such focal firm actions against competitor group threats differ, contingent on the focal firm's market and resource profiles. Results from the empirical analyses, with survey data from the Indian IT industry, provide broad support to our hypotheses. Managerial summary : Based on a World Bank dataset on the Indian IT industry, this study finds that corruption and HR training are pursued by firms in emerging economies as mindful strategies against specific types of rivals—informal and foreign firm rivals, respectively, and are not pursued simply as culturally‐based practices. Multinational companies may need to understand that domestic firms in emerging countries will engage in corruption strategically to reduce their costs and time to market of their products/services. Therefore, multinational firms may need to devise suitable strategies other than corruption to reduce their costs and time to market if they wish to compete with firms in emerging economies for customers who don't care about ethical issues and will buy a cheaper product/service that is delivered quickly. Copyright © 2015 John Wiley & Sons, Ltd.     

The effect of CEO pay deviations on CEO withdrawal,firm size,and firm profits

We build upon previous work on the effects of deviations in CEO pay from labor markets to assess how overcompensation or undercompensation affects subsequent voluntary CEO withdrawal, firm size, and firm profitability, taking into account the moderating effect of firm ownership structure. We find that CEO underpayment is related to changes in firm size and CEO withdrawal, and that the relationship between CEO underpayment and CEO withdrawal is stronger in owner‐controlled firms. We also show that when CEOs are overpaid, there is higher firm profitability; a relationship that is weaker among manager‐controlled firms. We then discuss the implications that these findings have for future research. Copyright © 2010 John Wiley & Sons, Ltd.     

Strategic action and customer mobility: Antecedents and consequences of strategic actions in the Korean mobile telecommunication service industry

This paper investigates the sources and consequences of strategic actions in the Korean mobile telecommunication service industry. Based on competitive dynamics research and an organizational learning perspective, it suggests hypotheses and tests them with monthly data on service providers’ competitive and alliance actions, as well as statistics on monthly subscribers during 2002–2007. We show the positive effects of a firm’s own experience, other firms’ strategic actions, and firms’ alliance tendencies on the likelihood of firm-level competitive action and alliance. We also find that negative performance feedback accelerates the mimetic influence of rival firms’ competitive actions and that positive performance feedback strengthens the momentum effect of a firm’s own alliance experience on the likelihood of alliance. Both competitive actions and alliances appear to influence customer mobility across firms in a complex manner. Based on customer mobility data, this study finds that alliances increase market dynamism, that is, customer mobility. It also shows that competitive actions, in general, serve to effectively attract switching customers from rivals. This study partially answers questions regarding the triggers of competitive actions and alliance activities among mobile telecommunication service providers and their performance consequences.     

Examining CEO succession and the role of heuristics in early‐stage CEO evaluation

This study develops and tests predictions regarding factors that influence early‐stage CEO evaluation. We suggest that contextual elements of the CEO succession process will influence the heuristics that directors employ to aid in their early evaluation of a CEO because traditional performance metrics, such as firm performance, are less diagnostic of CEO quality in the first years of their tenure. Broad empirical support for our theoretical arguments is shown in a sample of Fortune 1000 firms. Copyright © 2012 John Wiley & Sons, Ltd.     

Are founder CEOs more overconfident than professional CEOs? Evidence from S&P 1500 companies

Research summary : We provide evidence that founder chief executive officers (CEOs) of large S&P 1500 companies are more overconfident than their nonfounder counterparts (“professional CEOs”). We measure overconfidence via tone of CEO tweets, tone of CEO statements during earnings conference calls, management earnings forecasts, and CEO option‐exercise behavior. Compared with professional CEOs, founder CEOs use more optimistic language on Twitter and during earnings conference calls. In addition, founder CEOs are more likely to issue earnings forecasts that are too high; they are also more likely to perceive their firms to be undervalued, as implied by their option‐exercise behavior. We provide evidence that, to date, investors appear unaware of this “overconfidence bias” among founders. Managerial summary : This article helps to explain why firms managed by founder chief executive officers (CEOs) behave differently from those managed by professional CEOs. We study a sample of S&P 1500 firms and find strong evidence that founder CEOs are more overconfident than professional CEOs. To date, investors appear unaware of this overconfidence bias among founders. Our study should help firm stakeholders, including investors, employees, suppliers, and customers, put the statements and actions of founder CEOs in perspective. Our study should also help members of corporate boards make more informed decisions about whether to retain (or bring back) founder CEOs or hire professional CEOs. Copyright © 2016 John Wiley & Sons, Ltd.     

Resource orchestration in practice: CEO emphasis on SHRM,commitment‐based HR systems,and firm performance

In order to be effective, managers at all levels of the firm must engage in resource management activities, and these efforts are synchronized and orchestrated by top management. Using a specific type of strategic resource, commitment‐based human resource systems, we examine the effect of CEO resource orchestration in a multi‐industry sample of 190 Korean firms. Our results demonstrate that CEO emphasis on strategic HRM is a significant antecedent to commitment‐based HR systems. Furthermore, our results also suggest that CEO emphasis on strategic HRM has its primary effects on firm performance through commitment‐based HR systems. This finding underscores the importance of middle managers in operationalizing top management's strategic emphasis, lending empirical support to a fundamental tenet of resource orchestration arguments. Copyright © 2013 John Wiley & Sons, Ltd.     

Contingent Product Design and Marketing Strategies Influencing New Product Success and Failure in U.S. and Japanese Electronics Firms

The commercial success or failure of a product doesn't rest solely on the whims of the marketplace. The myriad, often interdependent, strategic trade-offs made throughout the product development process go a long way toward determining whether a product succeeds or fails. The key to success often rests in finding the right combination of product design and market choice decisions. Toward that end, William E. Souder and X. Michael Song examine the relationship between product success and several product design and market choice strategies. In particular, they explore the possibility that the correct strategy combination differs depending on a firm's perception of market uncertainty, which they measure in terms of the respondents' perceived familiarity with the market for a product, perceived understanding of customer needs, and perceived capability to translate those needs into product performance specifications. Recognizing that the correct combination of strategic choices may also depend on firm size, industry, and culture, the study focuses on small U.S. suppliers of electronics components. Fortune 500 producers of electronics final products, and Japanese producers of electronics final products. For the small U.S. firms in the study, an emphasis on performance superiority, technical superiority, or radically new products provides a recipe for failure under low market uncertainty. Even under high market uncertainty, these characteristics do not equate to success for the small U.S. firms in this study. The findings suggest that these firms should focus on design compatibility with a purchaser's installed base. The responses from Fortune 500 firms and Japanese companies indicate that under low market uncertainty these larger organizations should consider emphasizing compatibility and avoiding radical designs. For markets that the larger firms perceive to be highly uncertain, the results suggest that these companies should emphasize performance superiority, technical superiority, and radical designs. The findings related to market choice strategies also support the notion that the correct combination of strategic decisions depends on firm size, culture, and the perceived level of market uncertainty. However, the guidelines presented in this study should not be construed as hard-and-fast rules for formulating product strategy. Instead, the results presented here will be helpful for challenging assumptions and guiding actions, as one element in the effort to shape an effective product strategy.     

Firm responses to social movement pressures: A competitive dynamics perspective

Why do firms respond to social movement pressures differently? This study investigates how the strategic motivation of firms, as captured by competitor activity and market dependence, influences the likelihood of their response to social movement demands. We examine this through a longitudinal analysis of wind power adoption by electric utilities in U.S. deregulated markets. We find that when either competitor actions aligned with movement demands or firm dependence on targeted markets increase, the positive effect of movement activism on firm response diminishes. In contrast, as strategic motivation declines, increases in movement activism become more influential at eliciting firm responses. Copyright © 2014 John Wiley & Sons, Ltd.     

Competitive positioning within and across a strategic group structure: the performance of core,secondary, and solitary firms

Drawing from economic and cognitive theories, researchers have argued that firms within an industry tend to cluster together, following similar strategies. Their positioning in strategic groups, in turn, is argued to influence firm actions and firm performance. We extend this research to examine performance implications of competitive positioning not just among but also within groups. We find that performance differences within groups are significantly larger than across groups, suggesting that some firms within groups develop better resource or competitive positions. We also find that secondary firms within a group outperform both core firms within the group and solitary firms, the latter being those not belonging to any multifirm strategic group. This suggests that secondary firms may be able to effectively balance the benefits of strategic distinctiveness with institutional pressures for similarity. We conclude that the primary implication of strategic groups does not relate to the ability of firms to create stable, advantageous market segments through collusion. Instead, strategic groups represent a range of viable strategic positions firms may stake out and use as reference points. Moreover, our results concerning secondary firms indicate that firm positioning within a group structure can have performance implications. Copyright © 2002 John Wiley & Sons, Ltd.