Does CEO optimism affect strategic process?

Abstract

PurposeAlthough management researchers have long recognized that cognitive and behavioral constructs can influence strategic process, there have been surprisingly few empirical studies exploring their actual influence. More specifically, there have been no reported findings examining how an executive's general tendency to expect positive outcomes (i.e. optimism) shapes their strategic process. The purpose of this paper is to examine if optimism serves as a cognitive bias that short‐circuits the strategic process, or more specifically results in a greater use of incrementalism versus a comprehensive rational process.Design/methodology/approachThis is an initial study to explore the relationships between optimism and strategic process. The authors opted for a large cross‐sectional sample of chief executive officers (CEOs) in the for‐profit sector of the US healthcare industry, distributed 810 surveys, and received a 21 percent response rate. The authors' methods incorporated the well‐established Life Orientation Test for optimism, and interaction effect regression models, correlations, and ANOVAs were used to test relationships.FindingsIt was found that at the time of the study, executives were more optimistic than average. It was further found that higher optimism is associated with less rational (and more incremental) strategic decision‐making processes. Organizational size also had an interaction effect on the optimism‐strategic process relationship.Research limitations/implicationsThe authors operationalized only a few variables in this initial study. A more comprehensive study, utilizing many more variables and exploring optimism for the top management team (beyond just the CEO) is being incorporated into subsequent studies.Practical implicationsIf disposition (e.g. optimism) is associated with strategic processes, then a better understanding of executive's dispositions could be used to better align CEOs with organizational types and stage of life cycle.Originality/valueThis is the first study of its kind to begin to explore the association between dispositional optimism and strategic processes.