Study by ifm PhD student Marc Kowalzick published in renowned Journal of Management

Extant research on CEO hubris has amassed substantial evidence on the positive association of this prominent managerial disposition and CEOs’ attraction to challenging and consequential strategic activities. Yet does this mean that these CEOs strive for frequent transformations of their firms’ overarching trajectories or that they see little reason for scrutinizing and adapting extant paths in light of the magnificent prospects under their outstanding leadership?

Two PhD students of the University of Mannheim, Marc Kowalzick (Chair of SME Research and Entrepreneurship, ifm) and Moritz Appels (Chair of Sustainable Business), assessed this question in a paper now published in Journal of Management.

https://journals.sagepub.com/doi/full/10.1177/01492063221104398

In their study, they describe the theoretical obscurity surrounding the dispositional preference for change or steadiness associated with CEOs’ hubris and consider its effect on two key domains of change within the immediate purview of a CEO: strategic change and top management team membership change. Using data on S&P 1500 firms from 1996 to 2016 they present comprehensive evidence for a steadiness perspective: Despite arguments endorsing positive associations, hubristic CEOs constantly refrain from changing their firms’ overarching trajectories. Assessing the relevance and pervasiveness of hubristic CEOs’ preference for steadiness more generally, they demonstrate that it also carries over to a reduced fluctuation of firm performance. 

Appreciating this preference for steadiness as a central tenet of hubris emphasizes the need to move beyond the high-stakes activities typically associated with more hubristic CEOs and thus to acknowledge the heterogeneity of CEOs’ complex psychological characteristics and its implications for organizational outcomes.