Echelons Perspective Research Articles

Do external founder CEOs place strategic emphasis on innovation? An upper echelons perspective

AbstractResearch compares the influence of two types of chief executive officers (CEOs) on a firm's innovation strategy: founder CEOs, who founded the firms they lead, and professional CEOs, who worked in corporations at different levels before being selected as CEOs. We introduce a third type of CEO, external founders, who founded other ventures before being appointed as CEOs. Drawing on upper echelons theory, we propose that the unique combination of external founder CEOs' values and knowledge predisposes them to place less strategic emphasis on innovation than founder CEOs do but more than professional CEOs do. Heterogeneity among external founder CEOs may be due to nuances related to their exposure to professional investors in and successful exits from the ventures they founded. We assess our hypotheses empirically using the innovation‐related speech in investor communications and patent applications of 1637 CEOs of 789 S&P 500 firms from 2000 to 2019. We find that external founder CEOs emphasize innovation less than founder CEOs do, but contrary to our hypotheses, also less than professional CEOs do. However, certain nuances in external founder CEOs' founding experience bring their strategic emphasis on innovation close to that of founder CEOs. We extend upper echelons research by providing a fine‐grained view of the role of (founding) experience and its qualitative nuances in shaping CEOs' strategic decision‐making.

Shaping innovation outcomes: The role of CIOs for firms’ digital exploration

Digital technologies have rapidly pervaded firms, industries, and economic networks. This development has raised expectations that a firm’s chief information officer (CIO) will take a more strategic role, including innovation leadership and digital exploration. In this study, we argue from an upper echelons perspective that CIOs’ career variety and role tenure are critical in shaping the extent to which firms explore digital technologies in their patent portfolio, that is, digital exploration. We expect a U-shaped relationship between CIO career variety and digital exploration, and an inverted U-shaped relationship between CIO role tenure and digital exploration. We test our conceptual model using a cross-industry panel of U.S. firms. As predicted, the results show high digital exploration for low and high career variety, and low digital exploration for moderate career variety, that is, a U-shape. Conversely, they show low digital exploration for low and high role tenure, and high digital exploration for moderate role tenure, that is, an inverted U-shape. These insights indicate that CIOs do become strategic leaders in exploring and shaping digital innovation.

What makes hospitality and tourism executives adopt information and communication technology: Antecedents and outcomes of ICT adoption

While previous hospitality and tourism research has concentrated on the benefits of information and communication technology (ICT) adoption from the perspectives of customers and suppliers, less attention has been placed on this stream of research from an upper echelons perspective. Furthermore, a limited number of studies have explored the relationship between ICT adoption and its financial implications. Using various theoretical foundations (i.e., upper echelons theory, industrial organization theory, resource-based view, and organizational learning theory), this study attempts to provide an overarching conceptual framework that can explain the antecedents and consequences of adopting ICT. More specifically, this paper delves into industry- and firm-specific conditions to better understand the relationship between a top management team’s (TMT) attributes and ICT adoption as well as the relationship between ICT adoption and its financial implications.

Generalist vs. specialist CEOs: Towards an understanding of CSR scheme in the restaurant industry

In response to the increasing interest in and importance of Corporate Social Responsibility (CSR) and the role of leadership in the restaurant industry, there is a strong need to better understand how restaurant firms engage in CSR initiatives. Based upon the upper echelons perspective, this study examines how generalist and specialist CEO characteristics are manifested in firms CSR profiles and how franchising and internationalization strategies moderate this CEO-CSR relationship. Results from the panel analysis show that generalist CEOs of restaurant firms are more likely to engage in CSR activities that accommodate a wide range of stakeholders. In addition, franchising and internationalization strategies positively moderate the relationship between generalist CEOs and CSR actions, encompassing various stakeholder groups.

CEO's industry experience and emerging market SME performance: The effects of corruption and political uncertainty

We examine how Chief Executive Officer (CEO) industry-specific experience influences firm performance in small and medium enterprises (SMEs) in emerging markets. Drawing on the upper echelons perspective and learning theory, we propose an inverted U-shaped relationship between an SME CEO's industry-specific experience and firm performance. We also argue that country corruption and political instability moderate this relationship, resulting in lower performance for SME CEOs with little industry experience or many years of industry experience in countries with high corruption or political instability. We test our hypotheses using data from the World Bank's Enterprise Survey of firms in emerging economies from 2006 to 2019. The results support our hypotheses that corruption and political instability primarily hurt the performance of SMEs with CEOs having very long industry experience. We discuss implications of this research for scholars studying SMEs in lesser-developed institutional environments and how leaders may influence SME performance.

Board diversity as strategic choice and why it should matter to SMEs

PurposeDiversity in boards has gained attention as a reflection of societal imbalances. The purpose of this paper is to investigate the impact of diversity in terms of both gender and nationality in management boards of small and medium-sized enterprises (SMEs) on firm performance from an upper echelons perspective. The authors also examine how board-specific characteristics influence the structural makeup of boards in gender and nationality diversity terms.Design/methodology/approachThe authors focus on the UK because of its individualistic society and flexible labour market and assess 309 SMEs in the manufacturing industry over 2009–2019. A 3-stage least squares (3SLS) estimator is used to analyse the data, the Shannon index to measure board diversity, return on assets as proxy for firm performance, and owner-manager presence, board member age and tenure are the board-specific characteristics of primary interest.FindingsBoth gender and nationality diversity contribute to firm performance and represent distinct upper echelon characteristics that change the cognitive and psychological dynamics of boards. Firms with larger boards do not perform better, but diverse boards reduce the narrowing view of CEOs. Yet the presence of owner-managers, despite their performance-enhancing contribution, holds firms back from benefitting from diversity as a strategic choice.Originality/valueThis study extends the upper echelons theory to include board diversity as an important aspect that should become more central in upper echelon thinking when understanding firm performance. The authors’ findings suggest that theoretical developments in search of understanding firm behaviour must proceed by accounting for diversity and not simply focusing on decision-making styles.

On the micro-foundations of corporate social responsibility: a perspective based on dynamic managerial capabilities

PurposeThis study proposes that the three core underpinnings of dynamic managerial capabilities (DMCs) – managerial cognition, managerial human capital and managerial social capital – represent individual-level micro-foundations that influence corporate social responsibility (CSR). It further explores the interaction mechanism between the three underpinnings in influencing CSR, and their influence depends on the technological turbulence caused by big-data-related technologies.Design/methodology/approachThis study uses a quantitative research method and partial least squares structural equation modelling (PLS-SEM) to test the relationship between latent factors based on a sample of 270 Chinese top managers.FindingsThe three core underpinnings of DMCs are positively related to CSR. Managerial human capital and managerial social capital mediate the relationship between managerial cognition and CSR. Technological turbulence's moderating effects are also tested. Specifically, technological turbulence amplifies the positive relationship between managerial cognition, managerial human capital and CSR but negatively moderates the relationship between managerial social capital and CSR.Originality/valueWhy are some firms more willing to participate in CSR than others mainly depend on the fact that the actual participants of CSR are the top managers who formulate strategies and implement CSR plans. This study, grounded in the DMCs framework and the upper echelons perspective, is arguably the first to link DMCs' three core underpinnings and CSR, and further explore the multiple drivers' mechanisms and boundary conditions. This study contributes to individual micro-foundation of CSR literature, and advances the understanding of whether and how top managers influence CSR engagement.

Breaking Down Innovation: The Influence of CEO Overconfidence on New Product and Process Development

Firms with overconfident CEOs engage more in innovation and have more innovative success compared to firms with rational CEOs. However, the relation between CEO overconfidence and different types of innovation is unclear. It is important to differentiate between product and process innovation because both have distinct characteristics and are associated with different strategies. Building on the upper echelons perspective, we develop and empirically investigate theory on how CEO overconfidence relates to product and to process innovation. We find evidence that CEO overconfidence relates more strongly to product than to process innovation. With regard to environmental characteristics, our research shows that the relation between CEO overconfidence and product innovation is stronger in industries with low R&D intensity. Our study offers multiple contributions. First, we contribute to the literature on firm managers and innovation by differentiating between types of innovation, specifically product and process innovation, and integrating the implications of industry R&D intensity. Second, we advance the upper echelons perspective by comparing how CEO overconfidence relates to product and process innovation. Third, we transfer research on overconfidence and innovation to SME environments and identify CEO overconfidence as antecedent of SME innovation.

Upper Echelons and the Transmission of Institutional Norms: Varieties of Capitalism and CSR

Both national institutional context and the attributes of firms’ upper echelons (UE) are well known to shape corporate social responsibility (CSR) policies, practices, and outcomes. However, prior research has paid little attention into interdependencies between the two, and especially to the role played by the attributes of firms’ UEs in transmitting CSR norms internationally. In this study, we integrate the upper echelons perspective (UEP) and the varieties of capitalism (VOC) perspective to theorize upper echelons as critical to the transmission of CSR practices. Our theory suggests that representation among firms’ UEs from multiple VOCs tends lead firms to exhibit less nationally stereotypical patterns of CSR and instead to exhibit hybrid forms of CSR that reflect the diversity of their UEs. Additionally, we propose that this tendency towards CSR hybridization is moderated by the degree of critical mass, positional power, and long tenure among “alternate” VOC UE members. We test our hypotheses on a sample of 4,010 large firms from 68 countries between 2009 and 2018, and find evidence that largely confirms our hypotheses.

CEO Political Ideology: Revisiting its Responsibility Implications

As an integral component of their value system, CEOs’ political ideology—their stance along the liberal–conservative continuum—has come to be regarded a major determinant for (ir)responsible behavior. Yet, prior work remains inconclusive on whether a more liberal or a more conservative ideological leaning induces CEOs to engage in more or less (ir)responsible behavior. Applying an upper echelons perspective to assess the effect of CEO political ideology on a highly controversial corporate practice, earnings management, we argue that what distinguishes the (ir)responsibility of liberal versus conservative-leaning CEOs may at times rather be its configuration than its degree and depend on the context in which managerial action occurs. Analyzing a panel dataset of 872 S&P 1500 CEOs, we find considerable support for our arguments that liberal-leaning CEOs particularly prefer to inflate reported earnings in line with their preference for current achievement. Conservative-leaning CEOs likewise engage in earnings management, yet particularly tend to deflate reported earnings in line with their preference for inhibition to forestall potential future ambiguity. We show how this ideological inclination to manage earnings varies along contextual characteristics inducing variance in CEOs’ short-term versus long-term orientation and thus offer a comprehensive contribution to our understanding of the irresponsibility of liberal and conservative-leaning CEOs.

James Bond Chief Executive Officer and Firm Internationalization:

By integrating upper echelon perspective (UEP), dynamic capability view (DCV) and international entrepreneurship (IE) literature, a conceptual model is developed to illustrate how the interaction between Chief Executive Officer (CEO) dark personality traits (narcissism, psychopathy, Machiavellianism) and firm-level factors including entrepreneurial orientation (EO), opportunity exploration and opportunity exploitation may influence the firm internationalization. The interaction between these variables can stimulate firm internationalization activities, potentially resulting in following an early and accelerated internationalization (Born-Global) rather than traditional internationalization (e.g., Uppsala model) by firms run by CEOs high in dark personality traits.

CEO Personality Traits and Corporate Environmental Performance

This study examines how chief executive officers’ “Big Five personality traits” (FFM)- conscientiousness, extraversion, agreeableness, openness to experience, and emotional stability - affect corporate environmental performance (CEP). Drawing from upper echelon perspective (UE) and natural-resource-based view (NRBV) of the firm, we argue that FFM traits of CEOs are associated with CEP. Using a sample of 304 CEOs of 276 S&P 1500 firms, we found that CEO conscientiousness, extraversion, and openness to experience are positively related to CEP. We used a novel technique based on linguistic analysis developed by IBM to assess the FFM traits of CEOs. Our study advances the microfoundations of CEP and UE research.

Daring to be Digital: The Role of CEO Overconfidence in the Digitalization of SMEs during COVID-19

Digitalization has important advantages for firms, for instance with respect to innovation and financial performance. These advantages are particularly relevant for SMEs. Nevertheless, SMEs lag behind larger firms regarding digitalization. This is troublesome because the COVID-19 pandemic worked as accelerator for digitalization, which suggests that firms that do not adapt will face competitive disadvantages. We propose that CEO overconfidence relates positively to digitalization in SMEs. We conduct two research studies. In study 1, we find evidence in favor of a positive relation between CEO overconfidence and digitalization. In study 2, we investigate the relation during the COVID-19 pandemic. Our results indicate that the positive relation persists during economic crises such as the COVID-19 pandemic. Moreover, we find that the relation between CEO overconfidence and digitalization is stronger in industries with low environmental dynamism. Our study offers two main contributions. First, we advance the upper echelons perspective by explaining how CEO overconfidence relates to digitalization. Second, we contribute by integrating the dynamic capabilities framework into the upper echelons perspective in the context of dynamic environments.

The Politics of Acquisitions: An Upper Echelons Perspective

Acquisitions are among the most complex, exacting, intractable, and high stakes decisions faced by Top Management Teams (TMTs). Consequently, they are inherently political in nature—provoking conflicting viewpoints and power struggles among executives. While political behavior is a central construct in organizational theory, and despite widespread acknowledgement of its inevitable presence in Mergers and Acquisitions (M&A) decision making, there is a shortage of theory and evidence concerning its antecedents and consequences. Consequently, to address this gap, we draw upon the upper echelons literature to develop and test a theoretical model of political behavior in M&A decision making. Focusing on the psychological context surrounding the TMT, we theorize that TMT cognitive diversity fuels political behavior which in turn undermines acquisition performance. Critically, we also theorize that TMT cohesion serves as the central generative mechanism enabling acquirers to counteract the effects of TMT cognitive diversity and thereby dampen damaging political behavior. We test our theoretical model using a field sample of 109 acquisitions in the UK, utilizing direct psychometric measures validated with objective secondary performance data. The results support our theory, and TMT cognitive diversity leads to political behavior during M&A decision making. TMT cohesion reduces political behavior, it also interacts with cognitive diversity, and contrary to our theory, cognitive diversity appears to weaken the benefits of cohesion. Based on these findings, we discuss the important theoretical and practical implications.

CEO characteristics and the Doing-Using-Interacting mode of innovation: a new upper echelons perspective

ABSTRACT Little is known about how, and through which characteristics, CEO effects DUI mode innovation activities in SMEs. Thus, we connect the DUI mode concept with business management research and use data from 40 qualitative interviews in German non-R&D-based, but innovative SMEs. Applying the upper echelon concept as an analytical framework our results show that the CEO acts as an important moderator and mediator between DUI learning mechanism and innovation performance. In particular CEO’s values and cognitive base may help to increase innovation activities of the employees. Our paper is the first that empirically applies CEO’s psychological attributes of the upper-echelons concept to DUI innovations in non-R&D SMEs. We have developed a new version of the upper echelons model as well as hypotheses gained from the qualitative data analysis that are ready to be tested with quantitative procedures to improve the upper echelons theory concerning DUI-led innovation processes in SMEs.

Entrepreneurship and new product development: Exploring the “advantage of youth” and “business acumen” views

AbstractWe explore the relevance of two different views on new product development (NPD) drivers, defined as “advantage of youth” and “business acumen.” The two arguments, that establish a negative relationship between an individual's age and NPD and a positive impact of professional experience on NPD, are theoretically contextualized and empirically tested in the entrepreneurship domain. Considering a sample of more than 4000 Italian entrepreneurs of innovative start‐ups, a series of econometric analyses confirm that both effects apply and reveal interesting nuances as to the relevance of the age effect and the relative importance of different dimensions of entrepreneurs' business acumen on NPD. Further additional analyses highlight how both the “advantage of youth” and “business acumen” do not necessarily lead to successful entrepreneurial NPD, but at the same time, they both are found to importantly characterize top performers among entrepreneurs engaging in NPD. Overall, this in‐depth analysis on entrepreneurial NPD and its drivers underlies the importance of a micro‐founded and individual‐based approach in the study of new product dynamics, and in doing so, it contributes to enrich the upper echelons perspective and related frameworks on innovation outcomes through entrepreneurship. By theorizing and documenting those personal demographic and human capital traits which are mostly associated with entrepreneurial NPD, a series of interesting implications quite naturally descend for several stakeholders: (prospective) entrepreneurs, managers who aim at nurturing an intrapreneurship culture within their companies and policy makers interested in increasing dynamic efficiency in the economic system through the launch of new products and services.

Team Ownership and Philanthropy in Professional Sport: A Perspective on Organizational Generosity.

Corporate philanthropy (CP) is a vehicle for businesses to create a social impact in communities where their operations are located. An overlooked aspect of this phenomenon is the role and function played by CP influencers within firms—particularly organizational principals/owners. Using an upper echelons perspective, this study explores the relationship between team ownership and the level of CP in the professional sport context. To this end, longitudinal data of philanthropic giving of 94 U.S. professional sport teams in the NBA, NFL, MLB, and NHL were collected. We also collected team owner characteristics such as individual/family ownership, age, tenure as team owner, other charitable work, educational background, and connection to community from a variety of publicly available sources. The findings revealed that team owner age, ownership tenure, and previous philanthropic involvement contributed to increased charitable giving in professional sport team corporate foundations. Theoretical and practical implications of these findings are discussed in the paper.

CEO foreign experience and corporate sustainable development: Evidence from China

AbstractThis study examines the impact of CEO foreign experience on corporate sustainable development from the angle of firm green innovation. Using manually collected data of CEOs' foreign experience, we find that CEO foreign experience is positively associated with firm green innovation in China. The positive relationship between CEO foreign experience and green innovation (including green invention patents and green utility model patents) is more significant when the firm is state owned, when the firm has better corporate governance, and when the firm is subject to a better institutional environment. Further analyses indicate that both foreign work and foreign educational experiences matter; relative to experiences gained in underdeveloped countries, those related to developed economies tend to be more influential in facilitating green innovation. Finally, the documented association is robust to a series of robustness checks, including propensity score matching, instrumental variable approach, Heckman two‐stage model, and the inclusion of firm fixed effects. Overall, this paper contributes to the upper echelons perspective, and it also offers clear practical implications through showing that hiring returnee CEOs can enhance firms' sustainable development, which could be of interest to policy makers in other emerging markets.

Carbon disclosure project: Chinese chief executive officer background and corporate voluntary climate change reporting

Despite recent voluntary climate change reporting (VCCR) initiatives, such as the Carbon Disclosure Project (CDP), Chinese companies continue to lag behind their global counterparts. This research contributes to the existing literature examining the effects of CEO background (specifically academic, foreign and political background) on corporate decisions to engage in VCCR. The data sample consists of Chinese listed companies that participated in CDP surveys during 2010–2017 (1041 final firm-year observations). The study’s descriptive findings reveal that most Chinese companies are reluctant to report their climate change information to the CDP as only 12% of Chinese companies participated in the CDP annual survey during the study period. However, using a logistic regression model, we find that CEOs with academic experience, foreign exposure and political connections positively affect firms’ decisions to engage in VCCR. The results remain robust when we use the propensity score matching technique to account for sample selection problems. Overall, the results are interpreted within the theoretical insights of the upper echelons perspective.

Untangling the role of CEOs' political ideology in the provision and inclusiveness of work–family policies: a multi-level conceptual model

PurposeAcknowledging the importance of work–family practices that extend beyond what is legally mandated and that cover the needs of a diverse workforce, this paper offers a conceptual model that explores the factors that can influence the provision and inclusiveness of work–family policies in organizations.Design/methodology/approachThe conceptual model is based on a thorough literature review of relevant articles in the fields of management and political science.FindingsIn line with the upper echelons perspective, chief executive officers’ (CEOs') political ideology is a multidimensional concept, comprising two main dimensions (financial and social) that can influence the provision and inclusiveness of work–family practices. Moreover, the proposed conceptual model considers other important factors, such as the centrality of the CEO's political ideology, as potential moderating factors, as well as the conditional role of institutional pressures. Finally, the proposed model takes into account the important role of line managers/supervisors in the implementation of work–family policies and shows the importance of the provision and inclusiveness of work–family practices for critical organizational outcomes (organizational attraction and turnover).Originality/valueThe proposed conceptual model offers a more in-depth understanding of the factors that influence the provision and inclusiveness of work–family policies.