Abstract

In today’s dynamic economic environment, enterprises must maintain sensitivity and flexibility when responding to the market through continuous strategic change. Anchored in the approach–inhibition theory of power, this study explores the relationship between CEO power and corporate strategic change and examines the moderating effects of company underperformance and product market competition. The study uses data from all A-share listed companies in China during 2006–2017. The results indicate that first, there is an inverted U-shaped relationship between CEO power and corporate strategic change. Appropriate centralization of CEO power helps promote corporate strategic change, whereas excessive centralization hinders strategic change. Second, low underperformance strengthens the inverted U-shaped relationship between CEO power and strategic change. Finally, high product market competition strengthens the inverted U-shaped relationship between CEO power and strategic change.

Highlights

  • We propose Hypothesis 1: Hypothesis 1 (H1): There will be an inverted U-shaped relationship between CEO power and corporate strategic change where CEO power is positively related to the corporate strategic change to a point, after which it becomes negative

  • We argue that underperformance strengthens the curvilinear relationship between CEO power and corporate strategic change so that both halves of the curve become steeper with increased underperformance

  • The grouping moderating effect of product market competition on the relationship between CEO power and corporate strategic change is shown in Models (5) and (6)

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Summary

Introduction

The results indicate that first, there is an inverted U-shaped relationship between CEO power and corporate strategic change. Low underperformance strengthens the inverted U-shaped relationship between CEO power and strategic change. High product market competition strengthens the inverted U-shaped relationship between CEO power and strategic change. CEO power refers to the power that can override objections to influence key decision outcomes within the company [4]. This power can be obtained in formal or informal ways [1,5]. Do powerful CEOs initiate more corporate strategic change because they take more risks and can access and allocate more resources?

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