Navigating the Double-Edged Sword: Executive hubris and its impact on customer acquisition and retention

Abstract

This research employs upper echelons theory to examine whether executive hubris augments a firm's customer acquisition while concurrently impairing its customer retention. Drawing on an information processing perspective, we suggest that the influence of executive hubris on customer acquisition and retention is shaped by executives' selective attention to information. This influence is observed to amplify in the presence of market uncertainty and recede with an increase in firm product market experience. We validate these predictions through a mixed-method research design. Study 1 includes an original survey that gathers multi-informant responses, coupled with the subsequent year's ROA data, to assess the role of hubris and the moderating effects of market uncertainty and firm product market experience. Study 2 consists of two experimental studies that manipulate executive hubris to test its causal influence on customer acquisition and retention. Moreover, we utilize an eye-tracking method to examine whether the proposed influence is driven by executives' selective information processing. Our findings enhance the existing literature on upper echelons and marketing strategy, providing practical insights to align executive traits with firms' marketing objectives.