The Impact of the Financial Crisis on Directive Leadership Behavior

Abstract

Research in the tradition of the threat-rigidity hypothesis links threats to organizational actions, arguing that an external threat like the global 2008 financial crisis leads to rigidity in organizational responses. Our study adds a relevant and novel behavioral perspective to this hypothesis, by focusing on leadership behavior in an international context. We expect that across firms and countries and controlling for managerial variation, the 2008 financial crisis led to an increase of directive leadership. Second, we also anticipate that this change is context-specific. Using a multilevel approach, we analyze the impact of the 2008 financial crisis on directive leadership for over 20,000 managers in 980 organizations across 36 countries. We find that the crisis went along with a significant increase of directive leadership, and that this effect was stronger in the manufacturing sector and in countries with a high degree of power distance. Our findings support and extend the threat-rigidity hypothesis, and exemplify the importance of contextualizing leadership in the field of international business.