CEO transformational leadership and firm performance: A moderated mediation model of TMT trust climate and environmental dynamism

This study examines the role of top management team (TMT) trust climate in the relationship between CEO transformational leadership (TFL) and firm performance under dynamic environments. The research results based on a sample collected from firms in Vietnam show that TMT trust climate is a key mediator which can convert CEO TFL into better performance outcomes. Moderated-mediation analyses further reveal that the mediating effect of TMT trust climate is more significant in less dynamic environments. Our study contributes to the TFL theory by identifying a critical mechanism that intervenes in the relationship between CEO-level TFL and firm performance. We reveal how CEOs exert leadership influence on subsequent TMT dynamics and performance outcomes by navigating external environments. Moreover, our study offers insights with regard to the trust theory by uncovering TMT-level intragroup trust as a mediator, and thus complements most of prior examinations that focus on the moderating role of trust in workplace team contexts.     

CEO career horizon,corporate governance,and real options: The role of economic short‐termism

Research Summary: Combining studies on real options theory and economic short‐termism, we propose that, depending on CEOs’ career horizons, CEOs have heterogeneous interests in strategic flexibility, and thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long‐term incentives and institutional ownership will mitigate the relationship between CEOs’ career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self‐seeking behavior will impact real options investments. Managerial Summary: This article helps to explain how a CEO's self seeking‐behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms’ real options, which should lower the investments in the firms’ real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long‐term incentives and institutional investors.     

Higher Highs and Lower Lows: The Role of Corporate Social Responsibility in CEO Dismissal

Research summary: Investing a firm's resources in corporate social responsibility (CSR) initiatives remains a contentious issue. While research suggests firm financial performance is the primary driver of CEO dismissal, we propose that CSR will provide important additional context when interpreting a firm's financial performance. Consistent with this prediction, our results suggest that past CSR decisions amplify the negative relationship between financial performance and CEO dismissal. Specifically, we find that greater prior investments in CSR appear to expose CEOs of firms with poor financial performance to a greater risk of dismissal. In contrast, greater past investments in CSR appear to help shield CEOs of firms with good financial performance from dismissal. These findings provide novel insight into how CEOs' career outcomes may be affected by earlier CSR decisions. Managerial summary: In this study, we examined a potential personal consequence for CEOs related to corporate social responsibility (CSR). We explored the role prior investments in CSR play when a board evaluates the firm's financial performance and considers whether or not to fire the CEO. Our results suggest that while financial performance sets the overall tone of a CEO's evaluation, CSR amplifies that baseline evaluation. Specifically, our results suggest that greater past investments in CSR appear to (a) greatly increase the likelihood of CEO dismissal when financial performance is poor, and (b) somewhat reduce the likelihood of CEO dismissal when financial performance is good. Thus, striving to deliver profits in a socially responsible manner may have both positive and negative personal consequences. Copyright © 2017 John Wiley & Sons, Ltd.     

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.     

How Do Transformational Leaders Promote Exploratory and Exploitative Innovation? Examining the Black Box through MASEM

Understanding how firms can promote exploratory and exploitative innovations is of high interest for both scholars and practitioners. Although a substantial body of research has emphasized that top management's transformational leadership is crucial to innovation, the mechanisms through which strategic leaders influence these distinct types of innovations remain unclear. Building on upper echelon and social learning theory, this study develops and empirically examines a model that investigates the mediating roles of three distinct strategic orientations (market, learning, and entrepreneurial orientation) on the relationship between transformational leadership and exploratory and exploitative innovation. Using meta‐analytic methods combined with structural equation modeling, this study integrates findings from separate research streams, covering over 15 years of research, and using a sample of 215 effect sizes from 75 studies. The results from the partial mediation model reveal that transformational leaders play a key role in creating these specific strategic orientations which, in turn, support different innovation outcomes. Specifically, the findings indicate that transformational leaders promote exploitative innovations predominantly by building a market orientation, whereas they foster exploratory innovations by stimulating an entrepreneurial and a learning orientation. Hence, this study extends upper echelon research by uncovering the different mechanisms through which transformational leaders promote exploratory and exploitative innovations as it theoretically identifies and empirically validates the unique mediating roles of three specific strategic orientations. The results thus provide valuable insights for the challenging management of exploratory and exploitative innovations, as they provide a “guiding map” which reveals how transformational leaders from the top may use specific orientations to foster these distinct types of innovations.     

What Makes a Family Firm Innovative? CEO Risk‐Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk‐oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation‐related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium‐sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk‐taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium‐sized family firms operating in manufacturing industries, the results show that CEO risk‐taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk‐taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk‐taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk‐taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm‐specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.     

Transformational leadership,team climate,and team performance within the NPD team: Evidence from China

This study analyzes the impact of team transformational leadership on team performance during the new product development (NPD) process and the mediating role of team climate. Data were collected from 184 NPD projects of Chinese high-tech firms. The results show that NPD team transformational leadership is positively related to team performance. In addition, team climate mediates the relationship between most dimensions of NPD team transformational leadership (charisma, inspirational motivation, intellectual stimulation, and individualized consideration) and team performance.     

CEO research orientation,organizational context,and innovation in the pharmaceutical industry

This study develops and tests a comprehensive framework that explains what, when, and how CEO characteristics influence firms’ innovation outcomes in R&D-intensive industries. Empirical evidence from 109 CEOs from 87 U.S.-based pharmaceutical firms over the period 2001–2013 reveals that research-oriented CEOs – those with ability and motivation for science and technology – increase their firms’ innovation outcomes. The results indicate that the CEO–innovation relationship strongly depends on the extent of CEOs’ managerial discretion, which is shaped by the organizational context. We contribute to a more comprehensive understanding of the role of CEOs in firms´ innovation performance differentials.     

Using panel data dea to measure CEOs' focus of attention: An application to the study of cognitive group membership and performance

In this study, we examine the existence and performance of cognitive groups. In accordance with the attention‐based view of managerial cognition, cognitive groups are defined as groups of firms in which the CEOs focus their attention on similar strategic elements when seeking to maximize their firm's competitive advantage. We developed a panel data extension of the original Data Envelopment Analysis to gauge CEOs' focus of attention and then clustered firms into groups. We compared our approach with other approaches that use content analysis of CEOs' letters to shareholders and CEOs' demographic characteristics to measure CEOs' attention. Although the different approaches are related, indicating the existence of a common underlying construct (i.e., mental models), our approach explains a higher proportion of the variation in organizational performance. Copyright © 2014 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.     

Labor market evaluation versus legacy conservation: What factors determine retiring CEOs' decisions about long‐term investment?

Do CEOs nearing retirement attempt to boost short‐term firm performance or do they care more about what type of legacy they will leave behind? The two opposing predictions about the behavior of CEOs upon retirement suggest that retiring CEOs' decisions about certain long‐term investment items may be more complex than suggested in the literature. In search of an answer to this question, we examine the relationship between CEO retirement and the level of firm commitment to corporate social responsibility (CSR). The results show that CEO retirement has a negative effect on firm commitment to CSR. However, we found that the negative effect becomes weaker when CEOs retire at relatively older ages or are retained on the board of directors of their own firms. Our finding suggests that CEOs who face weaker pressure from the labor market for corporate directors may pay more attention to preserving their legacy. Copyright © 2014 John Wiley & Sons, Ltd.     

Lifting the veil on the link between absorptive capacity and innovation: The roles of cross-functional integration and customer orientation

Drawing on the integration of organizational learning, contingency theory, and theory of jobs to be done, this study develops a moderated mediation model of how a firm's absorptive capacity influences innovation performance. We hypothesize that cross-functional integration may mediate the absorptive capacity-innovation performance link and that customer orientation may positively moderate the mediating effect of cross-functional integration. To test our hypotheses, we conducted a mail survey of manufacturing firms, obtaining 456 valid responses for data analysis. Regression and bootstrap analyses reveal that cross-functional integration partially mediates the effect of absorptive capacity on innovation and that customer orientation enhances the mediated effect. Specifically, the mediating effect of cross-functional integration is stronger and significant when customer orientation is high. In contrast, the mediating effect of cross-functional integration is weaker and insignificant when customer orientation is low. Overall, this study's findings contribute to advances in marketing theory on innovation by identifying cross-functional integration and customer orientation as two key factors that together explain why and under what conditions absorptive capacity affects innovation. The findings also advise managers that in addition to developing absorptive capacity, firms should cultivate a strong customer orientation, which directs cross-functional integration toward converting external knowledge into increased innovation performance.     

The Influence of CEOs' Visionary Innovation Leadership on the Performance of High‐Technology Ventures: The Mediating Roles of Connectivity and Knowledge Integration

Senior leaders play an essential role in facilitating knowledge creation processes and driving firms' innovation performance. However, little is known about the underlying relational mechanisms by which CEOs help build knowledge integration capability and drive firm innovation. We developed and tested a conceptual model about the ways in which CEOs shape a context conducive for knowledge creation processes and drive multiple innovation performance. A field, survey‐based, study among small‐ to medium‐sized technological ventures (SMVs) showed that CEO visionary innovation leadership (manifested by both vision for innovation and enactment of the vision through specific leadership behaviors) was positively related to a context of connectivity. Connectivity was related to firm knowledge integration capacity, which in turn resulted in enhanced firm innovation (new product quality, development speed, and product innovation). The findings also indicate direct links between CEO visionary innovation leadership and knowledge integration, and between connectivity and product innovation. Implications for theory and practice are discussed.     

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.     

Innovation Field Orientation and Its Effect on Innovativeness and Firm Performance

New product development (NPD) has become a prime source for gaining a competitive edge in the market. Although a large body of research has addressed the question of how to successfully manage individual innovation projects, the management of a firm's new product portfolio has received comparably less research attention. A phenomenon that has recently emerged on the research agenda is innovation field orientation. Such orientation is understood as the deliberate setup and management of multiple thematically related NPD projects. However, the facets and effects of innovation field orientation are still unexplored. In particular, this study is interested in (1) developing a concept of innovation field orientation, (2) investigating the extent to which innovation field orientation is an established part of the corporate strategic planning practice, and (3) assessing the direct and indirect performance effects of innovation field orientation. For the empirical analysis, data were collected through a mail survey and document analyses from 122 publicly listed firms. Tobin's q was used as an objective performance metric directly related to shareholder value. The results confirm that innovation field orientation is a phenomenon that prevails in practice. In addition, all defining aspects of this orientation have either direct or indirect effects on firm performance. Hence, those firms that deliberately specify and manage innovation fields have a more innovative product portfolio and are more successful than others. Specifically, the findings underline the performance relevance of formally framing innovation fields and assigning a critical mass of resources to them. In addition, empirical support is lent to the suggestion that innovation field orientation has strong indirect performance effects mediated by the innovativeness of the firm's new product portfolio. This implies that firms that deliberately specify focus areas, assign resources to, provide organizational framing for, and stimulate synergies between related NPD projects stand a better chance to achieve a more innovative new product portfolio. This again is highly appreciated by investors and results in a superior stock market evaluation of these firms.     

Being the CEO's boss: An examination of board chair orientations

Research summary: Scholars have traditionally conceptualized board leadership as a dichotomous construct. A combined CEO and board chair position is interpreted as reflecting a more collaborative approach to corporate governance, whereas separate positions are interpreted as ensuring greater board control. I challenge this conceptualization and posit that a separate board chair can be oriented toward collaboration as well as—or in place of—control. I analyze newly available data from corporate proxy statements to identify these two board chair orientations and test competing perspectives on how they impact profitability growth in a sample of S&P 500 firms. The results indicate that board leadership is a more nuanced phenomenon than the extant literature would suggest . Managerial summary: What is the role of the board chair when not the CEO ? Corporate governance experts assert the board chair's role is to monitor and control the CEO . Yet, board chairs often play another, more collaborative role. Board chairs frequently provide advice and guidance to CEOs and relieve CEOs of board leadership burdens, enabling the CEOs to focus on their primary responsibilities. In this study, I examine the effect of board chair orientations on financial performance and find that, as with separating or joining the CEO and board chair positions, the profitability implications of the selected orientation are far from universal. Board chairs must consider their firm's performance context in order to get the most out of a particular approach to being the CEO 's boss . Copyright © 2016 John Wiley & Sons, Ltd.     

Leadership and organizational learning's role on innovation and performance: Lessons from Spain

Leadership style has been traditionally emphasized as one of the most important individual influences on firm innovation. Scholars are now paying growing attention to the possibility that the collective capability of organizational learning plays a key role in determining innovation. We propose that leadership style, an individual feature, and organizational learning, a collective process, simultaneously and positively affect firm innovation. A structural equation model and data from 408 large firms in four sectors supported our hypotheses. Organizational learning had a stronger direct influence on innovation than CEO transformational leadership for our sample; however, leadership had a strong, significant influence on organizational learning, indirectly affecting firm innovation. Additionally, innovation positively and significantly influenced performance. Organizational learning also positively affected performance, but interestingly mainly through innovation.     

Performance deviations and acquisition premiums: The impact of CEO celebrity on managerial risk‐taking

Research summary: This article draws on identity control theory and a study of acquisition premiums to explore how CEO celebrity status and financial performance relative to aspirations affect firm risk behavior. The study finds that celebrity CEOs tend to pay smaller premiums for target firms, but these tendencies change when prior firm performance deviates from the industry average returns, thereby leading these CEOs to pay higher premiums. The study also finds that the premiums tend to be even larger when celebrity CEOs have more recently attained celebrity status. Taken together, these findings contribute to identity control theory and CEO celebrity literatures by suggesting that celebrity status is a double‐edged sword and that the internalization of celebrity status by CEOs strongly influences the decision‐making of CEOs. Managerial summary: The purpose of this article is to examine how CEO celebrity status and financial performance relative to aspirations affect the size of acquisition premiums. The study finds that celebrity CEOs tend to pay smaller premiums for target firms. However, when celebrity CEOs' prior firm performance is either better or worse than the industry average, these CEOs pay higher premiums. This situation is exacerbated when the CEO has only recently been crowned a celebrity. In effect, these CEOs feel great pressure to match the inflated performance expectations that come with celebrity status. These findings suggest that being a celebrity is a double‐edged sword. The implication here is that CEOs who have recently been crowned a celebrity should be aware of these pressures and cope accordingly. Copyright © 2015 John Wiley & Sons, Ltd.     

Ripple Effects of CEO Awards: Investigating the Acquisition Activities of Superstar CEOs' Competitors

Research summary : This study proposes that CEOs may undertake intensive acquisition activities to increase their social recognition and status after witnessing their competitors' winning CEO awards. Using a sample of U.S. S&P 1,500 firm CEOs, we find that CEOs engage in more intensive acquisition activities in the period after their competitors won CEO awards (i.e., postaward period), compared to the preaward period. Moreover, this effect is stronger when focal CEOs themselves had a high likelihood of winning CEO awards. Our findings also show that acquisitions by focal CEO firms in the postaward period realize lower announcement returns compared to acquisitions by the same CEOs in the preaward period. Managerial summary : Each year a few CEOs receive CEO awards from business media and CEOs who receive such awards become instant celebrities, that is, superstar CEOs. This study explores how superstar CEOs' competitors react to not winning CEO awards. We find that superstar CEOs' competitors undertake more intensive acquisition activities in the postaward period compared to the preaward period. This is particularly true for competitors who were close, yet did not win CEO awards. In addition, acquisitions by superstar CEOs' competitors are associated with lower announcement returns in the postaward compared to the preaward period. These findings collectively indicate that acquisitions may be used as a channel for superstar CEOs' competitors to elevate their own social status, but at a cost to shareholders. Copyright © 2017 John Wiley & Sons, Ltd.     

An Attention‐Based View of Family Firm Adaptation to Discontinuous Technological Change: Exploring the Role of Family CEOs' Noneconomic Goals

Recent studies show that managerial attention is a particularly important precursor of established firms' responses to discontinuous technological change. However, little is known about the factors that shape managerial attention‐response patterns. Our qualitative study investigates how the attention of family firm chief executive officers (CEOs) to discontinuous technological shifts, the interpretation and decision‐making processes associated with these changes, and ultimately organizations' responses are affected by CEOs' noneconomic goals. Based on seven longitudinal case studies in the German consumer goods industry, the paper induces a process model that extends the findings of the literature on the attention‐based view and helps to explain heterogeneity in family firms' adaptation to discontinuous technological change. This study shows that the family CEO's specific noneconomic goals—such as power and control, transgenerational value, the maintenance of family reputation, the continuance of personal ties, or personal affect associated with the family business—determine whether the CEO assesses an emerging technology as relevant enough to warrant a reaction from the firm. Moreover, the family CEO's noneconomic goals constrain the set of considered responses. The outcome of this sensemaking process determines the organization's response. For instance, in the specific context of this study, the goal of “family power and control” entailed an immediate interpretation of the focal trend as important for maintaining influence, and resulted in an unconstrained set of responses and, ultimately, high innovation in the new domain. Over time, family CEOs might reevaluate the emerging trend based on their goals and adapt organizational moves accordingly. The paper identifies and discusses how ambiguities and dilemmas may arise during this process. Our findings contribute to the literature on adaptation to discontinuous technological change and to family firm research.